Written by: Castle Labs
Translated by: Yangz, Techub News
When Satoshi Nakamoto released the white paper, mining Bitcoin was very simple; any player with a mainstream CPU could easily accumulate wealth worth millions of dollars in the future. Instead of playing "The Sims" on a home computer, one could build a substantial family fortune, allowing future generations to avoid hard labor, with a return on investment of about 250,000 times.
However, most players were still engrossed in "Halo 3" on Xbox, with only a few teenagers utilizing their home computers to earn wealth surpassing that of modern tech giants. Napoleon created legends by conquering Egypt and Europe, while you only needed to click "Start Mining."
In fifteen years, Bitcoin has evolved into a global asset, with its mining relying on large-scale operations supported by billions of dollars in funding, hardware, and energy investments. The average power consumption for each Bitcoin mined is as high as 900,000 kilowatt-hours.
Bitcoin has spawned a new paradigm, standing in stark contrast to the tightly controlled financial world we grew up in. It may be the first true rebellion against the elite class after the failure of the "Occupy Wall Street" movement. Notably, Bitcoin was born right after the great financial crisis during the Obama era—this crisis largely stemmed from the indulgence of casino-like high-risk banking practices. The Sarbanes-Oxley Act of 2002 aimed to prevent a repeat of the future internet bubble; ironically, the financial collapse of 2008 was far more severe.
Whoever Satoshi Nakamoto is, their invention came at the right time, a fierce yet thoughtful rebellion aimed directly at that powerful and omnipresent Leviathan.
Before 1933, the U.S. stock market was essentially unregulated, constrained only by scattered state-level "Blue Sky" laws, leading to severe information asymmetry and rampant wash trading.
The liquidity crisis of 1929 became a stress test that crushed this model, proving that decentralized self-regulation could not contain systemic risk (does this sound familiar?). In response, the U.S. government executed a hard reset through the Securities Act of 1933 and 1934, replacing the "buyer beware" principle with a central enforcement agency (SEC) and mandatory disclosure mechanisms, thereby unifying the legal norms for all public assets to restore the credibility of the system's solvency… We are witnessing the exact same process reemerge in the DeFi space.
Until recently, cryptocurrencies operated as unlicensed "shadow banking" assets, functioning similarly to the pre-1933 era but with dangers multiplied due to a complete lack of regulation. This system relied on code and speculation as its core governance mechanisms, failing to adequately consider the enormous risks posed by this financial beast. The continuous wave of bankruptcies in 2022 resembled the stress test of 1929, indicating that decentralization does not equate to unlimited returns and sound currency; rather, it created risk nodes that could potentially engulf multiple asset classes. We are witnessing a shift in the spirit of the times from a liberal casino-like paradigm to a mandatory transition to compliant asset classes—regulators are attempting to make cryptocurrencies undergo a U-turn: as long as they are legal, funds, institutions, high-net-worth individuals, and even nations can hold them like any other asset, thus making them taxable.
This article attempts to reveal the origins of the institutional rebirth of cryptocurrencies—this transformation is now inevitable. Our goal is to deduce the inevitable conclusion of this trend and precisely define the ultimate form of the DeFi ecosystem.
The Implementation of Regulatory Frameworks
Before DeFi truly entered its first dark age in 2021, its early development relied more on federal agencies extending existing laws to accommodate the definitions of digital assets than on new legislation. Indeed, everything had to be done step by step.
The first significant federal action occurred in 2013 when FinCEN issued guidance classifying crypto "exchanges" and "service providers" as money service businesses, effectively subjecting them to the Bank Secrecy Act and anti-money laundering regulations. We can view 2013 as the year DeFi was first recognized by Wall Street, paving the way for law enforcement while also laying the groundwork for suppression.
In 2014, the IRS announced that virtual currencies would be treated as "property" rather than currency for federal tax purposes, complicating matters as each transaction triggered capital gains tax obligations; thus, Bitcoin gained legal classification and, consequently, the ability to be taxed—far from its original intent!
At the state level, New York introduced the controversial BitLicense in 2015, the first regulatory framework requiring crypto businesses to disclose information. Ultimately, the SEC concluded this feast with the "DAO Report," confirming that many tokens were classified as unregistered securities under the Howey Test.
By 2020, the Office of the Comptroller of the Currency briefly opened the door for national banks to provide custody services for crypto assets, but this move was later questioned by the Biden administration—this is a common practice among past presidents.
Across the Atlantic on the old continent, similarly outdated practices governed the crypto world. Influenced by the rigid Roman legal system (which is entirely different from common law), a spirit opposing personal freedom permeated, trapping DeFi's potential in a regressive civilization. We must remember that America is essentially a Protestant nation; this spirit of self-governance shaped America, a country always defined by entrepreneurial spirit, freedom, and a pioneering mindset.
In Europe, Catholicism, the Roman legal system, and remnants of feudalism gave rise to a distinctly different culture. Therefore, it is not surprising that ancient countries like France, the UK, and Germany have taken different paths. In a world that values compliance over risk-taking, crypto technology is destined to face severe repression.
Thus, the early characteristics of Europe were marked by decentralized bureaucracies rather than a unified vision. The industry achieved its first victory in 2015 when the European Court ruled in the Skatteverket v. Hedqvist case that Bitcoin transactions were exempt from VAT, effectively granting crypto assets legal status as currency.
Before the introduction of unified EU laws, there were discrepancies among countries regarding cryptocurrency regulation. France (PACTE Act, a poor legal framework) and Germany (crypto custody licenses) established strict national frameworks, while Malta and Switzerland competed to attract businesses through top-notch regulations.
This chaotic era ended with the implementation of the 2020 Fifth Anti-Money Laundering Directive, which mandated strict KYC across the EU, completely eliminating anonymous transactions. Realizing that 27 sets of conflicting rules were unsustainable, the European Commission finally proposed the Markets in Crypto-Assets Regulation (MiCA) at the end of 2020, marking the end of the patchwork regulatory era and the beginning of a unified regulatory system… much to everyone's frustration.
America's Advanced Paradigm
Oh, blockchain, can you see, as Donald clears the way, what was long imprisoned now stands legally?
The transformation of the U.S. regulatory system is not a true systemic reconstruction; it is primarily driven by opinion leaders. The power shift in 2025 brought a new philosophy: mercantilism overshadowed moralism.
Trump's issuance of his infamous meme coin in December 2024 may be the climax, or perhaps not, but it indicates that the elite class is willing to make the crypto space great again. Several crypto popes now steer the course, forever moving towards securing more freedom and space for founders, builders, and retail investors.
Paul Atkins took the helm of the SEC, and rather than being a mere personnel appointment, it was a regime change. His predecessor, Gary Gensler, viewed the crypto industry with pure hostility. He became a thorn in the side of our generation; Oxford University even published papers revealing how painful Gensler's reign was. It is believed that due to his radical stance, DeFi leaders lost years of development opportunities, hindered by a regulator that should have been leading the industry but was instead disconnected from it.
Atkins not only halted lawsuits but also effectively apologized for it. His "Project Crypto" plan is a model of bureaucratic shift. This "plan" aims to establish an extremely dull, standardized, and comprehensive information disclosure mechanism, allowing Wall Street to trade Solana like oil. A&O Shearman law firm provided the following summary:
Establish a clear regulatory framework for U.S. crypto asset issuance
Ensure freedom of choice for custodians and trading venues
Embrace market competition and promote the development of "super apps"
Support on-chain innovation and decentralized finance
Innovate exemptions and commercial viability
Perhaps the most critical shift occurred at the Treasury. Janet Yellen once viewed stablecoins as systemic risks. However, Scott Basset—a bureaucrat with a hedge fund mindset—recognized their true nature: the only net new buyers of U.S. Treasury bonds.
Basset understands the tricky algorithms of the U.S. deficit. In a world where foreign central banks are slowing their purchases of U.S. debt, the infinite demand for short-term government bonds from stablecoin issuers is a solid boon for this new Treasury Secretary. In his eyes, USDC/USDT is not a competitor to the dollar but a pioneer that can extend dollar hegemony to those turbulent countries where people would rather hold stablecoins than depreciating fiat currencies.
Another "villain" who has spun around is Jamie Dimon, who once threatened to fire any trader touching Bitcoin, but has now completed one of the most profitable 180-degree turns in financial history. The crypto asset mortgage business launched by JPMorgan in 2025 is a white flag raised by him. According to The Block, JPMorgan plans to allow institutional clients to use Bitcoin and Ethereum holdings as loan collateral by the end of this year, marking Wall Street's deeper foray into the cryptocurrency space. Additionally, Bloomberg cited informed sources stating that the plan will be offered globally and will rely on third-party custodians to safeguard the pledged assets. The war was effectively over when Goldman Sachs and BlackRock began to nibble away at JPMorgan's custody fee income. The banks won without a fight.
Finally, the lonely crypto lady in the Senate, Cynthia Lummis, has now become the most loyal advocate for the new collateral system in the U.S. Her proposed "Strategic Bitcoin Reserve" has moved from the fringes of conspiracy theory to serious committee hearings. Although her grand theories have not truly impacted Bitcoin prices, her efforts are sincere.
The legal landscape of 2025 is defined by matters that have already settled and those that remain dangerously unresolved. The current government's enthusiasm for the crypto space is so high that top law firms have established real-time tracking services for the latest crypto news: for example, the "U.S. Crypto Policy Tracker" from Ropes & Gray, closely monitoring the latest developments as numerous regulatory agencies tirelessly roll out new rules for DeFi. However, we are still in the exploratory phase.
Currently, the debate in the U.S. revolves around two major legal frameworks:
The GENIUS Act (passed in July 2025); this act (full name: "U.S. Stablecoin National Innovation Act") marks Washington's first serious attempt to address the most critical asset after Bitcoin—stablecoins. By mandating strict 1:1 Treasury bond reserves, it transforms stablecoins from systemic risks into geopolitical tools, akin to gold or oil. The act effectively authorizes private issuers like Circle and Tether, making them legitimate purchasers of U.S. Treasury bonds. It can be considered a win-win situation.
In contrast, the CLARITY Act remains a distant prospect. This market structure bill, aimed at ultimately clarifying the disputes between the SEC and CFTC regarding the definitions of securities and commodities, is currently stalled in the House Financial Services Committee. Until this bill is passed, exchanges will remain in a comfortable yet fragile middle state—operating under temporary regulatory guidance (which is still the case today) rather than the permanent protection of codified law.
Currently, the bill has become a focal point of contention between Republicans and Democrats, with both sides seemingly using it as a weapon in political gamesmanship.
Finally, the repeal of Staff Accounting Bulletin 121 (a technical accounting rule requiring banks to treat custodial assets as liabilities, effectively preventing banks from holding cryptocurrencies) has opened the floodgates, marking the moment when institutional capital (even pension funds!) can finally purchase crypto assets without fear of regulatory backlash. Correspondingly, the market has begun to see life insurance products priced in Bitcoin; the future looks bright.
Old Continent: An Innate Aversion to Risk
Ancient times were often filled with slavery, customs, and laws that benefited the powerful and oppressed the common people. — Cicero
What is the meaning of a mature civilization that has birthed geniuses like Plato, Hegel, and even Macron (just kidding) if its current builders are stifled by a group of mediocre bureaucrats who only know how to prevent others from creating?
Just as the church once bound scientists to the stake (or merely judged them), today's regional powers have designed complex and obscure laws that may only serve to deter entrepreneurs. The gap between the vibrant, young, rebellious American spirit and the languid, defeated, and stumbling Europe has never been so vast. Brussels had the opportunity to break free from its usual rigidity but chose to remain insufferably self-satisfied.
The Markets in Crypto-Assets Regulation (MiCA), fully implemented by the end of 2025, is a masterpiece of bureaucratic intent and an absolute disaster for innovation.
MiCA is marketed to the public as a "comprehensive framework," but in Brussels, this term usually means "comprehensive torment." It does bring clarity to the industry, but clarity that is daunting. The fundamental flaw of MiCA lies in its category mismatch: it regulates startups as if they were sovereign banks. The high compliance costs are destined to lead crypto companies to failure.
Norton Rose released a memorandum that objectively explains the regulation.
Structurally, MiCA is effectively an exclusion mechanism: it places digital assets into a highly regulated category (asset-referenced tokens and electronic money tokens) while burdening crypto asset service providers (CASPs) with a heavy compliance framework that replicates the MiFID II regulatory system typically designed for financial giants.
According to the provisions of Chapters 3 and 4, the regulation imposes strict 1:1 liquidity reserve requirements on stablecoin issuers, effectively banning algorithmic stablecoins by placing them in a legally "bankrupt" state from the outset (which could itself constitute a significant systemic risk; imagine being declared illegal by Brussels overnight?).
Moreover, institutions issuing "significant" tokens (notoriously sART/sEMT) face enhanced regulation from the European Banking Authority, including capital requirements, making it economically unfeasible for startups to issue such tokens. Nowadays, without a top-notch legal team and capital matching traditional financial businesses, starting a cryptocurrency company is nearly impossible.
For intermediaries, Chapter 5 completely eliminates the concept of offshore and cloud exchanges. CASPs must establish registered offices within member states, appoint resident directors who pass "suitability" tests, and implement segregated custody agreements. Article 6's "white paper" requirement transforms technical documents into binding prospectuses, imposing strict civil liability for any significant misstatements or omissions, thereby piercing the veil of anonymity that the industry typically cherishes. This is akin to requiring you to open a digital bank.
Although the regulation introduces a passporting right, allowing CASPs authorized in one member state to operate throughout the European Economic Area without further localization, this "coordination" (a terrifying word in EU law) comes at a high cost. It creates a regulatory moat that only capital-rich institutional participants can afford the costs associated with anti-money laundering/anti-terrorism financing integration, market abuse monitoring, and prudential reporting.
MiCA is not just about regulating the European crypto market; it effectively blocks access for participants who lack the legal and financial resources (which is precisely what crypto founders almost always lack).
Above EU law, the German regulator BaFin has become a mediocre compliance machine, its efficiency reflected only in handling the paperwork of a dwindling industry. Meanwhile, France's ambitions to become Europe's "Web3 hub" or "startup nation" have collided with its self-erected walls. French startups are not programming; they are fleeing. They cannot compete with the pragmatic speed of the U.S. or the relentless innovation of Asia, leading to a massive talent drain to Dubai, Thailand, and Zurich.
But the real death knell is the ban on stablecoins. The EU has effectively prohibited non-euro stablecoins (like USDT) under the guise of "protecting monetary sovereignty," which has essentially ended the only reliable domain in DeFi. The global crypto economy relies on stablecoins. By forcing European traders to use low-liquidity "euro tokens" that no one wants to hold outside the Schengen area, Brussels has created a liquidity trap.
The European Central Bank and the European Systemic Risk Board have urged Brussels to ban the "multi-jurisdictional issuance" model, where global stablecoin companies treat tokens issued within the EU as interchangeable with those issued outside. In a report led by ECB President Christine Lagarde, the ESRB stated that non-EU holders eager to redeem EU-issued tokens could "amplify the risk of runs within the region."
Meanwhile, the UK hopes to limit individual stablecoin holdings to £20,000… while imposing no regulations on altcoins. Europe's risk-averse strategy urgently needs a complete overhaul to prevent regulators from triggering a full-blown collapse.
I think the explanation is simple: Europe wants its citizens to remain shackled to the euro, unable to participate in the U.S. economy and escape economic stagnation, or rather, death. As Reuters reported: the European Central Bank warns that stablecoins could siphon valuable retail deposits from eurozone banks, and any run on stablecoins could have widespread implications for the stability of the global financial system.
This is utter nonsense!
Ideal Paradigm: Switzerland
There are some countries that, unburdened by partisan politics, ignorance, or outdated laws, have successfully escaped the binary opposition of regulatory "overreach and underreach" and found a path of inclusivity. Switzerland is such an extraordinary nation.
Its regulatory framework is diverse yet effective, with a friendly attitude that is welcomed by both service providers and users:
The Financial Market Supervision Act (FINMASA), enacted in 2007, is an umbrella regulation that established the Swiss Financial Market Supervisory Authority as the unified, independent regulator of the Swiss financial market by merging banking, insurance, and anti-money laundering regulatory bodies.
The Financial Services Act (FinSA) focuses on investor protection. It creates a "level playing field" for financial service providers (banks and independent asset management companies) by mandating strict codes of conduct, client classification (retail, professional, institutional), and transparency (basic information brochures).
The Anti-Money Laundering Act serves as the main framework for combating financial crime. It applies to all financial intermediaries (including crypto asset service providers) and sets forth basic obligations.
The Distributed Ledger Technology Act (DLT-Law, 2021) is a "comprehensive law" that amends ten federal laws (including the Debt Code and the Debt Enforcement Act), thereby legally recognizing crypto assets.
The Virtual Asset Service Provider Regulation enforces the Financial Action Task Force's "Travel Rule" with a zero-tolerance approach (no minimum threshold).
Article 305bis of the Swiss Penal Code defines the crime of money laundering.
The CMTA Standards, published by the Capital Markets and Technology Association, while not legally binding, have been widely adopted by the industry.
Regulatory bodies include: the Parliament (responsible for enacting federal laws), the Swiss Financial Market Supervisory Authority (which regulates the industry through decrees and announcements), and self-regulatory organizations (such as Relai) supervised by the Swiss Financial Market Supervisory Authority, which oversee independent asset management companies and crypto intermediaries. The Money Laundering Reporting Office is responsible for reviewing suspicious activity reports (similar to traditional finance) and forwarding them to prosecutorial authorities.
As a result, the Zug Valley has become an ideal place for crypto founders: a logically coherent framework not only allows them to operate but also enables them to do so under a clear legal umbrella, providing reassurance to users and comfort to banks willing to take on a small amount of risk.
Onward, America!
The Old Continent's embrace of the crypto space is not driven by a desire for innovation but rather by urgent financial needs. Since the 1980s, when the Web2 internet was handed over to Silicon Valley, Europe has viewed Web3 not as an industry worth building but as a tax base to be harvested, just like everything else.
This suppression is structural and cultural. In the context of an aging population and an overburdened pension system, the EU cannot afford a competitive financial industry that is beyond its control. This is reminiscent of feudal lords imprisoning or killing local nobles to avoid excessive competition. Europe has a terrifying instinct: to prevent uncontrollable change by sacrificing its citizens. This is foreign to the U.S., which thrives on competition, initiative, and even a Faustian will to power.
MiCA is by no means a "growth" framework; it is a death sentence. Its design ensures that if European citizens engage in transactions, they must do so within a monitored grid, guaranteeing that the state reaps its benefits, much like a monarch exploiting peasants. Europe is effectively positioning itself as a luxury consumption colony of the world, an eternal museum for awestruck Americans to mourn a past that cannot be revived.
Countries like Switzerland and the UAE have freed themselves from the shackles of historical and structural defects. They bear neither the imperialist burden of maintaining a global reserve currency nor the bureaucratic inertia of a group of 27 member states—an entity viewed as weak by all its members. By exporting trust through the Distributed Ledger Technology Act (DLT Act), they have attracted foundations holding actual intellectual property (Ethereum, Solana, Cardano). The UAE has also followed suit; it is no wonder that the French are flocking to Dubai.
We are entering an era of increased regulatory arbitrage.
We will witness a geographical split in the crypto industry. The consumer end will remain in the U.S. and Europe, subject to complete KYC, heavy taxation, and integration with traditional banks; while the protocol layer will migrate entirely to rational jurisdictions like Switzerland, Singapore, and the UAE. Users will be spread across the globe, but founders, venture capitalists, protocol teams, and developers will have to consider leaving their home markets in search of more suitable places to build.
Europe's fate is to become a financial museum. It is securing for its citizens a beautifully shiny legal system that is completely useless or even deadly to actual users. I can't help but wonder if the technocrats in Brussels have ever bought Bitcoin or transferred some stablecoins across chains.
Crypto assets have inevitably become a macro asset class, and the U.S. will retain its status as the global financial capital. It is already providing life insurance priced in Bitcoin, crypto asset mortgages, crypto reserves, endless venture capital support for anyone with an idea, and a vibrant soil for builders to thrive.
Conclusion
In summary, the "brave new world" that Brussels is constructing is less a coherent digital framework and more a clumsy, Frankenstein-like patchwork. It attempts to awkwardly graft the 20th-century banking compliance system onto 21st-century decentralized protocols, with designers who are primarily engineers ignorant of the European Central Bank's temperament.
We must actively advocate for a different regulatory system, one that prioritizes reality over administrative control, lest we completely stifle Europe's already weak economy.
Unfortunately, the crypto space is not the only victim of this risk aversion. It is merely the latest target of the high-salaried, complacent bureaucratic class that occupies the dull, postmodern corridors of various capitals. This ruling class's heavy-handed regulation stems precisely from their lack of real-world experience. They have never endured the pain of KYC for accounts, obtaining new passports, or acquiring business licenses; thus, despite the so-called tech elites at work in Brussels, founders and users in the crypto-native space must contend with a group of extremely incompetent individuals who achieve nothing but concocting harmful legislation.
Europe must pivot, and it must act immediately. While the EU is busy stifling the industry with red tape, the U.S. is actively determining how to "normalize" DeFi, moving toward a framework that benefits all parties. It is evident that centralization through regulation is the way forward: the collapse of FTX is a warning sign on the wall.
Those investors holding losses yearn for revenge; we need to break free from the current cycle of meme coins, cross-chain bridge exploits, and regulatory chaos in this "Wild West." We need a structure that allows real capital to enter safely (Sequoia, Bain, BlackRock, or Citigroup are leading this process), while also protecting end users from predatory capital.
Rome was not built in a day, but this experiment has been underway for fifteen years, and its institutional foundations have yet to emerge from the quagmire. The window of opportunity to establish a functional crypto industry is rapidly closing; in war, hesitation leads to defeat, and both sides of the Atlantic must implement swift, decisive, and comprehensive regulation. If this cycle is indeed coming to an end, now is the best time to restore our reputation and compensate all the serious investors harmed by bad actors over the years.
Exhausted traders from 2017, 2021, and 2025 demand a reckoning and final judgment on crypto issues; and most importantly, our most beloved assets deserve to reach their historical peaks.
Let’s take action!
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