To achieve true growth and influence in the cryptocurrency industry, it must accept the formalization of its regulatory status and the various consequences that come with it.

Author: Mario Laul

Translated by: Deep Tide TechFlow

The foundation of public blockchains was laid by cypherpunks. Although the cryptocurrency industry was destined from the beginning to embrace diverse ideas and practices, core principles such as decentralization, open-source software, cryptographic security, privacy protection, and self-sovereignty have always been the cornerstones of its most disruptive achievements.

However, this field also faces a core issue: in the absence of a regulatory framework that supports innovation and recognizes blockchain as an administrative infrastructure with unique functions, cryptocurrency entrepreneurs are forced to confront a difficult choice—whether to adhere to pure ideological principles, complicating the structure and operation of their projects; or to compromise on their original ideals in exchange for regulatory recognition and a more traditional path to mainstream success.

I call this dilemma the "Cryptopreneur’s Dilemma."

Since the birth of blockchain, it has carried a grand vision: to achieve the separation of money and state, to establish a censorship-resistant global payment and coordination network, to develop software services without single points of failure, and to create entirely new forms of digital organization and governance. Driving such revolutionary change requires a special historical context.

For the cryptocurrency industry, this context has been shaped by the aftermath of the global financial crisis and the evolution of data and business models of big tech companies. At the same time, the global proliferation of digital technology and the built-in token incentive mechanisms provided near-ideal conditions for the rapid development of the early cryptocurrency ecosystem. Since then, with the accumulation of social and financial capital within individual blockchain networks and the industry as a whole, the cryptocurrency industry has gradually become an undeniable force, particularly evident in the 2024 U.S. presidential election.

However, driving revolutionary change requires not only courage but also a certain degree of "sociological naivety." Any attempt to disrupt social structures, especially those based on law, often has a much higher probability of failure than success.

The cryptocurrency industry has indeed tapped into public dissatisfaction with traditional systems by challenging existing institutions, but this confrontational stance is difficult to reconcile with the goal of building digital platforms that serve global users. Similarly, blockchain transactions attempting to bypass the regulatory requirements of their respective jurisdictions (whether from the operators of the underlying infrastructure or the parties involved in the transactions) always face the risk of intervention by local law enforcement.

To achieve true growth and influence, the cryptocurrency industry must accept the formalization of its regulatory status and the various consequences that come with it. As a famous saying goes: "You may not be interested in the state, but the state is certainly interested in you."

Although many aspects are still changing, this is precisely what we see in practice. From taxing cryptocurrency-related activities, classifying tokenized assets, to enforcing anti-money laundering and counter-terrorism financing (AML/CTF) rules, and clarifying legal responsibilities in DAO governance, the cryptocurrency industry is gradually integrating into the existing regulatory framework centered around national jurisdictions.

However, what is more noteworthy is that this process has also spawned new case law and customized regulatory frameworks—these frameworks have become key battlegrounds for defending the original values of the cryptocurrency industry, preventing it from being overlooked or destroyed (whether intentionally or unintentionally) in ideological and political struggles. The existence of this "Cryptopreneur’s Dilemma" is due to the fact that, like any innovation with far-reaching implications, the process of legitimization is both slow and contentious. For the cryptocurrency industry, this process is particularly challenging, as the actions of some malicious opportunists have led to misunderstandings of the industry's image and unnecessary collateral damage.

Another noteworthy trend is the increasing integration of blockchain with traditional business and financial systems. For those who view the cryptocurrency industry as a parallel system aimed at replacing traditional institutions, this integration blurs the lines between the two, potentially triggering cognitive dissonance and internal conflict. For others, this integration is precisely a sign of success and the only sustainable path for blockchain to become a systemically important infrastructure. As the industry matures and risks decrease, its practitioners, operators, and user base will continue to expand and diversify. While this trend has attracted the attention of traditional enterprises, it may also further exacerbate the ambiguity of the cryptocurrency industry's narrative, especially when traditional institutions attempt to control seemingly neutral infrastructures. The risk of "institutional capture" will increase proportionally with the popularity of the cryptocurrency industry.

So, as public blockchains enter the next stage of their adoption curve, how should the "Cryptopreneur’s Dilemma" be repositioned?

On one hand, the success of the cryptocurrency industry's mainstreaming seems to rely more on deep integration with existing systems rather than clinging to some idealized, fully decentralized vision. Accepting the fact that most "cryptocurrency projects" may ultimately be no different from traditional enterprises or open-source software initiatives, or that most blockchain users are unlikely to fully embrace cypherpunk ideals, even as their primary basis for consumption decisions, is not unacceptable. As long as these systems can maintain open verifiability and be more resilient than existing alternatives, then "decentralized performance" is almost meaningless, and it is also reasonable for centralized enterprises to utilize and operate public blockchains. Therefore, once the regulatory status of the cryptocurrency industry is clarified, this dilemma may no longer be significant for most entrepreneurs.

However, it would be incorrect to view this as marking the end of the cryptocurrency industry's original vision. Technologies such as autonomous robots and artificial intelligence (AI) are injecting new, profound transformative power into the digital revolution, and the demand for powerful computing and information management services is more urgent than ever.

As an innovative platform, blockchain can provide alternatives for traditional systems that are vulnerable to corruption, mass surveillance, and single points of failure. Only when enough entrepreneurs and supporters persist in the difficult path of building truly decentralized, privacy-protecting, and anti-control systems can blockchain continue to exist. Although the commercial success of the cryptocurrency industry may no longer depend on these ideals, its long-term social influence undoubtedly still relies on them.

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