The Crypto Era and Legal Arbitrage
TL;DR
Much of the modern “Crypto” industry uses the guise of technological decentralization to evade financial regulations while behaving like traditional securities.
The Hijacking of “Crypto”
Originally, “Crypto” was shorthand for Cryptography, a mathematically rigorous field utilized heavily by the Cypherpunk community to ensure privacy and security.
However, starting around 2017 with the boom of ICOs (Initial Coin Offerings), the term was hijacked by marketers and promoters to refer broadly to the expanding cryptocurrency industry, encompassing a multitude of alternative coins (shitcoins), tokens, and DeFi (Decentralized Finance) platforms.
Legal Arbitrage
A significant portion of the modern “Crypto” industry exists primarily to perform Legal Arbitrage. They evade established financial regulations (such as securities laws) by offering stock-like promises to retail investors under the guise of “technological decentralization.”
In these models, the yield or expected return is often driven almost entirely by the efforts of third parties (founders, developers, foundations), which strongly resembles traditional securities, despite the use of blockchain technology or distributed ledgers.