Source: AiYing Compliance
Trump's re-election as US President has brought new uncertainties to the already volatile cryptocurrency industry, but it has also brought some benefits to the industry. This is also due to the previous statement "Detailed Explanation of the US Bitcoin Strategic Reserve Act: Purchase 200,000 Bitcoins Each Year, Reaching 1 Million in Five Years". Having said that, on the other hand, with Trump's victory in this election, everyone can't help but ask: What does this political change mean? Is it a relaxation of regulation, or will it bring new compliance risks? In this article, we deeply analyze the regulatory trends and policy expectations of the new US government from the perspective of A16Z and AiYing.
1. "Noise" and "Signal": Regulatory Optimism in the Market
After Trump's re-election, many market analysts and leading figures in the crypto industry are optimistic about the future regulatory environment. The cryptocurrency division of the well-known venture capital firm a16z (Andreessen Horowitz) recently expressed the view that the founders of crypto projects can now have more confidence in innovative experiments, especially in token issuance and community building. Many plans that were previously shelved due to concerns about regulation may finally be restarted.
a16z emphasized that there is now an opportunity to engage in constructive dialogue with regulatory and legislative bodies, which is expected to gradually bring regulatory clarity to the blockchain industry. This attitude seems to affirm that regulators may adopt more inclusive and innovation-driven policies. However, a16z also reminded that although the regulatory environment may be more flexible, it does not mean that crypto companies can completely get rid of the constraints of the law, especially those projects that still have centralized characteristics, which may still face strict scrutiny.
a16z also pointed out that there may be a lot of "hot opinions" and various speculations about regulation and legislation in the coming months, but most of them may be noise and it is impossible to accurately predict the direction of regulation. Although it is not clear what specific changes will happen in the future, one thing is certain: the new government policies have a significant impact on the crypto industry and may create a more favorable environment for the development of the entire industry.
Aiying believes that these statements are both "signals" and "noise". The signal is that US regulators may really give innovators more freedom under the existing framework to explore various application scenarios of blockchain; while the noise is that many comments may over-interpret the regulatory relaxation in the short term and ignore the complexity of legal operations.
Second, the "dawn" of token issuance, or a new round of regulatory challenges?
After the election results were announced, a16z specifically mentioned that token issuance may usher in a new "dawn", and many entrepreneurs can boldly use tokens to allocate project control and build communities. As one of the most controversial financial instruments in the crypto ecosystem, tokens have been in a gray area of regulation for many years - are tokens securities? How to prevent them from becoming a tool for speculation and illegal financing? These issues have always been the focus of regulators.
Trump's re-election has brought expectations of regulatory relaxation, making token issuance seem more likely. But the reality is that the compliance requirements for token issuance have not decreased. The "Token Release Guidelines" mentioned by a16z are still very valuable for reference, especially founders must consider whether their token model relies on the trust of a centralized entity. This means that any project that relies on centralization will still face strict scrutiny in the future. This is particularly important for the development of Web3 because it emphasizes the core position of decentralization in compliance.
Although the regulatory environment may be relaxed in the future, the basic principle of "where there is trust, there is regulation" still applies. This means that entrepreneurs need to continue to work hard to reduce the reliance on centralization in their projects, thereby reducing regulatory risks. At the same time, a16z also stated that they will continue to promote a clear regulatory framework next year to encourage and support innovation and decentralization.
3. Changes and invariances in the US regulatory direction: from Wyoming to the whole country
Ai Ying particularly noted that a16z mentioned that it would soon release new guidelines on the use of "decentralized non-profit associations (DUNA)". This legal innovation of the structure can help projects set up entities in the United States while reducing the responsibilities of token holders and managing tax and compliance requirements. This innovative structure, especially in blockchain-friendly states such as Wyoming, may provide a solution for projects that want to establish a legal identity but avoid responsibility. However, whether this legal structure can be recognized by other states or even at the federal level remains unknown.
Wyoming has been regarded as a "test field" for the crypto industry in recent years, and its DAO law has provided legal identity guarantees for many decentralized organizations. However, whether these innovations in Wyoming can be promoted nationwide and whether they can be recognized by federal regulators are issues that entrepreneurs must seriously consider in the coming year. Ai Ying believes that the development of the US crypto industry depends not only on the "first trial" of local governments, but also on whether the federal government can accept these experiments with an open mind.
a16z also emphasized that they will soon release detailed guidelines on DUNA to promote the activities of token holders in the United States, reduce their tax and compliance burdens, and promote the realization of more economic activities. These measures, combined with Wyoming's unique position in DAO law, may bring new development opportunities for US crypto projects, but it will take time to test the effectiveness.
Fourth, Conclusion: Opportunities and Responsibilities of Supervision
The regulatory changes after Trump's re-election can be regarded as a new opportunity for the crypto industry, but this also requires us to be vigilant about potential legal risks. The relaxation of supervision may provide innovators with more room for experimentation, but it does not mean that the basic requirements of compliance can be ignored. From Ai Ying's point of view, the wisest thing for entrepreneurs in the current environment is to actively embrace decentralization, minimize the centralized characteristics of the project, and ensure the transparency and legality of the project. At the same time, entrepreneurs in the industry should also pay close attention to the new legal guidelines that will be released, such as DUNA, and find the right legal structure to reduce risks.
To avoid US jurisdiction as much as possible, the key is to take a series of measures to ensure that the project is decoupled from US laws and regulations as much as possible. The reason why projects like Bancor have been able to successfully avoid the jurisdiction of US courts is mainly because its operating entities and founders are located in Israel and Switzerland, and its project activities mainly take place outside the United States. This enables Bancor to effectively avoid the impact of US securities laws through legal and territorial strategies. To emulate Bancor's approach, the following measures can be taken:
1. Set up the company in a country outside the United States
Like Bancor, set up the company's registration and operations in other jurisdictions, such as Switzerland, Israel or other countries that are more friendly to crypto projects. This can effectively avoid the project from being directly subject to US law.
2. Make sure the founders and team are not in the United States
Bancor's founders and key team members are outside the United States. If the founders and team were in the United States, they would automatically be subject to U.S. law.
3. Avoid providing services to U.S. investors
Limit U.S. investor participation: Bancor explicitly states that it does not provide services to U.S. citizens or residents, and strictly restricts their participation in token sales. You can ensure that U.S. investors cannot participate in token sales or use your platform through user agreements, KYC (know your customer) procedures, geo-blocking technology, etc.
Geo-blocking: Prevent U.S. users from accessing project websites or participating in token sales through IP address filtering and technical means. This technical means can reduce your project's exposure to the U.S. market.
4. No Promotion in the United States
Avoid any form of marketing or publicity in the United States, like Bancor. Make sure that the project's promotional activities are not promoted through US social media, advertising platforms or news channels to avoid attracting the attention of US investors.
5. Use the "Regulation S" exemption
If you cannot completely avoid international market contact, you can use the Regulation S exemption in the US securities law like Bancor. Regulation S allows securities to be issued in markets outside the United States, but requires you to ensure that these securities will not flow back to the United States. This can reduce conflicts with US securities laws.
6. Avoid token design being considered a security
Make sure the design of the token is more of a "utility token" rather than an investment tool. This can be achieved by avoiding over-promising benefits or returns and emphasizing the use function of the token on the platform. Bancor tries to avoid tokens being considered securities by providing liquidity rather than just being an investment tool.
7. Choose non-US applicable laws and dispute resolution mechanisms
In the user agreement and token sale contract, clearly stipulate that non-US legal systems apply and choose non-US dispute resolution mechanisms.
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