Bowing to Compliance

How did crypto move from the fringes to the mainstream? Over the past decade, decentralized blockchain systems have offered the world a regulatory wilderness. Satoshi Nakamoto’s vision of a peer-to-peer electronic cash system may not have succeeded as intended, but it opened the door to a parallel world. A world where laws, governments, societies, and even religions hold no sway — an internet existing across countless nodes, beyond centralized control.

Being outside of regulatory oversight was arguably the single most important driver of the industry’s early success. From the ICO boom and its countless derivatives, to the explosion of DeFi sparked by UNI, and now the rise of so-called super applications like stablecoins — every major milestone has been rooted in the ability to cut through the complexities of traditional finance. Stripping away the red tape of TradFi is what made this space what it is today.

But here’s the irony: like abandoning sailing ships after failing to discover new continents during the Age of Exploration, the crypto world seems to be turning back. Perhaps the turning point was the approval of the Bitcoin ETF, or maybe it was the moment Trump returned to power. Either way, the age of crypto in its purest form appears to be ending. The industry is now chasing compliance, trying to meet the demands of traditional finance. Stablecoins, RWAs, and payment use cases have become the new mainstream. Beyond that, all that’s left is pure asset issuance — an image, a story, a contract address, these are our only remaining topics of conversation. “Meme coin chains” are no longer pejorative.

How did we get here? I’ve explored many angles over the past two years, but it ultimately comes down to this: blockchain still lacks effective tools to constrain bad actors behind wallet addresses. We can ensure honest nodes, and we can enable permissionless DeFi. But we can’t stop what happens in this dark forest. The decline of many narratives was inevitable. NFT, GameFi, and SocialFi rely heavily on the real-world teams behind them. Blockchains are great for fundraising, but who holds these teams accountable for how they use that capital? Who ensures a story becomes a real product?

The vision of non-financialized applications cannot be realized through infrastructure upgrades alone. If these things can’t be done well on centralized servers, how can we expect the blockchain to do better? We cannot impose a proof-of-work standard on project teams. Today’s shift toward compliance may ironically be the beginning of the non-financial crypto era. It’s a bitter realization — one that feels contradictory, yet increasingly inevitable.

Crypto is becoming a subset of the traditional system. The power to write on the ledger is being stripped away from the bottom up. Grassroots innovation is fading. Opportunities are shrinking. What lies ahead may well be the age of on-chain hegemony.

Stablecoins

What does on-chain hegemony mean? In my view, it manifests in two ways: the rise of stablecoins and the repetition of old stories from the traditional internet.

Let’s start with the former. Today’s stablecoin landscape is dominated by fiat-backed and YBS (Yield-Bearing Stablecoin) models. A major event recently occurred in the fiat-backed sector — the passing of the so-called “Genius Act.” Here’s a simplified summary of its contents:

• Definition and Issuance Restrictions: A “payment stablecoin” is defined as a digital asset used for payments or settlements, fully backed 1:1 by USD or highly liquid assets such as short-term Treasuries. Only licensed and regulated entities can issue stablecoins legally; unauthorized individuals or entities are prohibited from doing so.
• Reserves and Transparency Requirements: Issuers must hold reserves equivalent to the value of issued stablecoins to ensure solvency and stability. Regular public disclosures of reserves are required, and issuers with over $50 billion in market cap must undergo annual financial audits and comply with AML and CFT requirements.
• Regulation and Compliance: A clear regulatory framework is established. Stablecoins are not considered securities and are instead regulated under banking laws rather than the SEC. Licensing processes, AML enforcement, asset freezing, and burning mechanisms are mandated.
• Innovation and Financial Inclusion: The bill aims to provide a clear legal framework to foster the stablecoin industry in the U.S., enhance financial inclusion, and solidify the U.S. dollar’s dominance in the digital economy.
• Big Tech Restrictions: Large tech firms are prohibited from issuing stablecoins without regulatory approval to prevent monopolistic behavior.

The long-standing concern over Tether’s potential collapse is now largely a thing of the past. Downstream payments are gradually entering the mainstream, and blockchain’s mass adoption is finally taking shape. But what does it mean when stablecoins are brought under strict regulation? How will other nations respond? The reasons for stablecoin success are well-known and don’t need repeating.

The approval of this legislation effectively hands control of on-chain transaction media to the U.S. Private companies enjoy yield from U.S. Treasury securities, and with monetary control in hand, the country now holds immense power over blockchain systems. Setting aside concerns over the continuation of dollar hegemony, imagine a DeFi protocol where all stablecoins are suddenly frozen. That’s not an abstract fear anymore.

On the other hand, YBS stablecoins are gaining momentum. Ethena’s vision is ambitious — offering UST-level returns during bull markets with far greater stability. As I’ve mentioned before, truly native on-chain stablecoins may eventually rely on delta-neutral strategies, such as those used by f(x)Protocol or Resolv, which hedges on platforms like Hyperliquid. Yet now, it seems everyone wants a piece of the YBS pie. First came the traditional hedge funds, then market makers like DWF, and now even exchanges want in. They may never become the next Tether, but they’re all scrambling for a slice of ENA.

This feverish YBS stablecoin craze has clearly deviated from its original purpose. Projects are leveraging their initial capital and increasingly aggressive strategies to capture market share. Truly innovative efforts are being drowned out, and entry barriers for startups are rising. In this environment, technology and ingenuity no longer matter. Decentralization is irrelevant. Innovative protocols like f(x) are largely overlooked. Today, the winning formula is CEX infrastructure plus elite quant teams. In this war, APY and user convenience reign supreme.

And while YBS stablecoins may be a better choice than trading ETH for JPEGs or chasing bizarre narratives, the fact that these CEX-wrapped yield products have become the only perceived “innovation” of this cycle simply underscores how wrong the past paths may have been.

Asset Issuance

Public blockchains have become the largest platforms for asset issuance, with ICOs marking the beginning of this game. Everything since has been a variation, at least giving rise to new narratives and advancing the industry. But now, the trend is clearly shifting toward the patterns of traditional internet development. Platforms like Base and Pump have business models nearly identical to Web2, offering virtually no value back to the community — in some ways, they lag behind centralized exchanges (CEXs). The original vision of Web3 was to democratize everything, to build and prosper together, but that ideal has lost its meaning.

That’s just the first point. Now, every dominant player is exploring how to become an asset issuance platform and what innovative asset issuance really means. Launchpads have become the last remaining place for native crypto users to dream of getting rich. Yet even here, things are unhealthy. Users must pay platforms or tools like GMGN just to participate, and the experience is akin to firing from a trench. Asset issuance has grown increasingly convoluted and, in some cases, now occurs entirely off-chain.

Sure, NFT and GameFi projects were never fully decentralized either, but at least they had on-chain components. They drove infrastructure development and helped the industry gain mainstream attention. Starting with AI frameworks earlier this year, we now see fully off-chain projects issuing tokens — some of them are asset issuance platforms in their own right, without touching the chain at all. Extreme speculation is dragging down the industry’s standards. What’s the point of all this?

CZ and Vitalik were perplexed by the meme coin frenzy, so the concept of DeSci (decentralized science) was introduced: let speculators speculate while real innovation happens in scientific research. It seemed like a rare overlap of interests. But can research on lab rats and classical mechanics really compete with today’s internet memes and bizarre AI creations? That narrative only caught on briefly. After AI and DeSci cooled off, celebrity coins took the stage — from North America’s Trump to South America’s President Milei — draining the last bits of liquidity from the market.

When the market cools and narratives fail to rotate, asset issuance resorts to Ponzi games. The “Virtuals” model combines Binance’s Launchpool with Alpha strategies: stake tokens to earn points to participate in launches, then restake the newly issued tokens. Prices did, indeed, skyrocket. And yet… the sheer brazenness of it all no longer excites me. What’s next? “Believe,” the so-called internet capital market?

I’m not sure. But in the last cycle, amidst all the flywheels, Ponzi schemes, and fleeting narratives, we did at least get DeFi — a true gem that sparked tons of innovation. What could emerge from this new wave of speculation? All I see is the continued lowering of the issuance threshold, with it, a surge in malicious activity. Perhaps what we really need is a new rulebook.

Attention

In the past, a project rose through narrative and technology — sparking consensus and then igniting growth. Now, we are buying attention. Platforms like Blur use point systems to buy it; exchanges build MCN-style agencies around KOLs using real money. This is the Pinduoduo + TikTok combo strategy, executed flawlessly within crypto. Compared to founders attending conferences and pitching tech, this new approach seems far more direct — and more effective.

There’s no doubt that attention is one of the most valuable assets in this era, but it’s difficult to measure. Kaito is now trying to quantify it. Though Yap-to-Earn is nothing new — SocialFi tried it ages ago — Kaito adds an AI-driven twist, claiming to assess the “value” of information and quantify influence. Still, this model can’t capture long-term value. Tokens are becoming fast-moving consumer goods.

We’ve all experienced the drawbacks of the three-stage points system, and I’ve already reviewed Blur’s impact in previous pieces. If future projects depend on buying attention, it’s hard to say whether that’s right or wrong. There’s no shame in aggressive marketing. But this entire ecosystem feels like it’s sliding into universal pump culture. The old crypto era is truly ending. Monetizing influence is now a mature business — whether it’s the U.S. president, Binance, or today’s influencers. None of it leads to long-term prosperity. Everyone is just taking what they need.

Conclusion

Stablecoins are going global. Blockchain-based payments are inevitable. But the native inhabitants of this space may not need any of that. What we need are truly on-chain native stablecoins, non-financial use cases, and the next real wave of innovation. We don’t want to live in a Web3 built entirely around monetizing traffic.

Time is proving that some of the Bitcoin OGs weren’t wrong. And yet, I still hope they are.

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