Author: Castle Labs
Translation: Shan Oppa, Jinse Finance

When Satoshi Nakamoto released the white paper, the barrier to Bitcoin mining was extremely low—any gamer with a decent CPU could mine what would one day be millions of dollars in Bitcoin every day.

Back then, if you gave up playing The Sims on your home desktop and mined instead, you could have built a fortune so great that your descendants would never have to work again—an ROI of around 250,000x.

But most gamers stayed glued to their Xboxes, obsessed with games like Halo 3; only a handful of teenagers mined at home, earning more than today’s tech giants. Napoleon conquered Egypt and then swept across Europe to become a legend, but you could have started your own path to wealth with a single click: “Start Mining.”

In 15 years, Bitcoin has become a global asset. Today, mining depends on massive operations powered by billions of dollars in capital, hardware, and energy—with the average energy cost to mine one Bitcoin reaching 900,000 kWh.

Bitcoin created an entirely new paradigm, in sharp contrast to the walled-off financial world we grew up with. It may be the first true rebellion against the elite since the failure of the Occupy Wall Street movement. Notably, Bitcoin was born in the aftermath of the global financial crisis during Obama’s tenure, largely driven by discontent with “casino banking.” The Sarbanes-Oxley Act of 2002 sought to prevent another dot-com bubble collapse, but ironically, the 2008 financial crisis was much worse.

Whoever Satoshi Nakamoto is, his invention came at just the right time—a sudden but well-considered act of resistance against the powerful and omnipresent “Leviathan.”

Before 1933, the US stock market was virtually unregulated, governed only by scattered state “Blue Sky Laws,” leading to severe information asymmetry and rampant wash trading.

The 1929 liquidity crisis was the stress test that broke this model, proving that decentralized self-regulation couldn’t contain systemic risk (sound familiar?). In response, the US government completely overhauled the system with the Securities Acts of 1933 and 1934, replacing “buyer beware” with central enforcement (SEC) and mandatory disclosure rules, legally standardizing all public assets and restoring confidence in the system’s solvency… Today, DeFi is undergoing the exact same process.

Until recently, crypto existed as a permissionless “shadow banking” asset, functionally similar to pre-1933 markets but far riskier due to the complete lack of regulation. Its architecture relied on code and hype as its main governance mechanisms, failing to account for the enormous risks of this “wild” industry. The wave of collapses in 2022 was the ecosystem’s “1929-style stress test,” demonstrating that decentralization doesn’t mean unlimited returns and robust currency; on the contrary, it created risk nodes that could swallow multiple asset classes. We are now witnessing a forced shift in the zeitgeist: crypto is moving from a libertarian “casino” paradigm to a regulated asset class. Regulators are trying to turn crypto into something that, once legalized, funds, institutions, high-net-worth individuals, and even governments can hold and tax just like any other asset.

This article will attempt to trace the origins of crypto’s institutional rebirth—a transition that is now inevitable. Our goal is to forecast a reasonable trajectory for this trend and define the likely endgame for the DeFi ecosystem.

Laying Down the Regulatory Rules

Until DeFi entered its first true “dark age” in 2021, its early development was characterized not by new regulations, but by federal agencies stretching existing laws to fit digital assets. Everything has its order, and so it was here.

The federal government’s first major move came in 2013, when FinCEN issued guidance classifying crypto “exchangers” and “administrators” as money service businesses, subject to the Bank Secrecy Act and anti-money laundering controls. 1933 could be seen as the year DeFi received its first recognition from Wall Street, paving the way for later enforcement and laying the groundwork for suppression.

In 2014, the IRS further complicated things by declaring that virtual currency should be treated as “property,” not currency, for federal tax purposes—meaning every transaction was subject to capital gains tax. Bitcoin was thus legally defined and made taxable—a far cry from its original intent!

At the state level, New York introduced its controversial “BitLicense” in 2015, the first regulatory framework requiring crypto businesses to fulfill disclosure requirements. Eventually, the SEC’s DAO Report ended this “unruly party,” confirming that many tokens were unregistered securities under the Howey Test.

In 2020, the OCC briefly opened the door for national banks to provide crypto custody services, but the Biden administration later opposed this move—a typical maneuver for incoming presidents.

Across the Atlantic in the Old World (Europe), equally outdated traditions dominated crypto regulation. Inspired by rigid Roman law and unlike common law, an anti-liberty spirit prevailed, limiting DeFi’s potential in this conservative civilization. Remember, America’s Protestant ethos shaped its entrepreneurial, freedom-loving, and pioneering character.

Europe, shaped by Catholicism, Roman law, and feudal remnants, naturally took a different regulatory path, so it’s no surprise that countries like France, the UK, and Germany ended up with divergent regulatory roads. In a climate that values compliance over risk-taking, crypto was bound to face severe suppression.

Early European crypto regulation was a patchwork of bureaucracies, not a unified vision. In 2015, the industry scored its first win—the European Court of Justice ruled in Skatteverket v Hedqvist that Bitcoin transactions were VAT-exempt, effectively acknowledging crypto’s monetary nature.

Before the EU introduced unified laws, each country took its own route, until the Markets in Crypto-Assets Regulation (MiCA) arrived. France (the PACTE Act, a poor legal framework) and Germany (crypto custody license regime) built strict national regulatory frameworks, while Malta and Switzerland competed to attract crypto businesses with top-notch policies.

The Fifth Anti-Money Laundering Directive in 2020 ended the chaos, requiring strict KYC across the EU and effectively banning anonymous transactions. The European Commission realized that conflicting rules among 27 countries were unsustainable, and finally proposed MiCA at the end of 2020, marking the end of fragmented regulation and the start of a unified system… to everyone’s disappointment.

America’s Forward-Looking Model

“Oh blockchain, can you see, as Trump clears the path ahead, those long-restricted things now gain legal status?”

Regulatory change in the US isn’t truly systemic; it’s driven by opinion leaders. The 2025 power shift brought in new ideas: mercantilism replaced moralism.

In December 2024, Trump released his controversial meme coin—a symbolic event or not—but it signaled the elite’s willingness to let crypto rise again. Now, several “leading figures” in crypto are steering the industry, always striving to win more freedom and space for founders, developers, and retail investors.

Paul Atkins’ appointment as SEC chair was less a personnel move and more a regulatory revolution. His predecessor Gary Gensler harbored pure hostility toward crypto, becoming the “thorn in the side” of our generation. An Oxford paper noted that Gensler’s rules were highly destructive. Many believe his hardline stance cost DeFi’s leaders years of growth, stymied by a regulator out of touch with the industry.

Paul Atkins not only stopped related lawsuits but even apologized in a roundabout way. His “Crypto Program” became a model for bureaucratic turnaround, aiming to create a boring, standardized, comprehensive disclosure regime so Wall Street could trade Solana and other crypto assets as easily as oil. Allen & Overy summarized the program’s core:

1. A clear regulatory framework for US crypto asset issuance
2. Freedom of choice for custodians and trading venues
3. Embracing market competition and promoting “super apps”
4. Supporting on-chain innovation and decentralized finance
5. Innovative exemption mechanisms and commercial viability guarantees

Perhaps the most crucial change happened at Treasury. Janet Yellen once saw stablecoins as a systemic risk, but Scott Bessent—hedge fund thinker in a bureaucratic post—understood stablecoins’ essence: they are the only net new buyers of US Treasuries.

Scott Bessent knows the tough reality behind America’s deficit. As foreign central banks slow their Treasury purchases, the huge demand for short-term Treasuries from stablecoin issuers is a major plus for the new Treasury Secretary. He views USDC, USDT, and others not as competitors to the dollar, but as its “vanguard,” extending dollar supremacy to troubled countries where people prefer stablecoins over ever-depreciating fiat.

Another former bear turned bull is Jamie Dimon. The JPMorgan CEO who once threatened to fire any trader touching Bitcoin pulled the most profitable 180 in financial history. In 2025, JPMorgan launched crypto-backed loans, marking total “surrender.” As The Block reported:

JPMorgan plans to allow institutional clients to use Bitcoin and Ethereum holdings as collateral for loans by year-end, signaling Wall Street’s deepening foray into crypto.

Bloomberg, citing sources, said the plan would be rolled out globally, relying on third-party custodians to secure the pledged assets.

When Goldman Sachs and BlackRock started eating into JPMorgan’s custody fee revenue, the “war” was effectively over. The banks won by avoiding confrontation.

Finally, there’s the mention of the Senate’s “lone crypto supporter” Cynthia Lummis—once tolerated but ignored, now the staunchest advocate of America’s new crypto collateral system. Her “Strategic Bitcoin Reserve” proposal, once fringe Twitter theory, is now in serious committee hearings. Her remarks haven’t really moved Bitcoin’s price, but her effort is unquestionable.

The 2025 legal landscape is both “settled” and “unresolved.” The administration is so pro-crypto that top law firms are tracking crypto in real time: Latham & Watkins’ “US Crypto Policy Tracker” monitors DeFi rulemaking at many agencies. Still, we’re in an exploratory phase.

Currently, two bills dominate US crypto debate:

1. The GENIUS Act (passed July 2025): The “Guiding and Establishing the National Innovation of the United States Stablecoin Act” finally brings stablecoins—the second most important crypto asset—under regulation. By requiring 1:1 Treasury reserves, it transforms stablecoins from a systemic risk into a geopolitical tool like gold or oil. It effectively authorizes private issuers like Circle and Tether to become recognized Treasury buyers—a win-win.
2. In contrast, the CLARITY Act is still “Waiting for Godot.” This market structure bill is stuck in the House Financial Services Committee, aiming to resolve the SEC-CFTC turf war over whether crypto is a security or a commodity. Until it passes, exchanges operate in a comfortable but fragile “gray zone” under temporary guidance, not permanent statute.

The bill is now a flashpoint between Republicans and Democrats, seemingly used as a political weapon.

Finally, the repeal of Staff Accounting Bulletin 121 (SAB 121) is hugely significant. This technical rule required banks to treat custodial assets as liabilities, effectively blocking banks from holding crypto. Its repeal opened the floodgates, meaning institutional money (even pension funds!) can now buy crypto without fear of regulatory retaliation. Meanwhile, insurance companies are launching Bitcoin-denominated life insurance—things look bright.

The Old World: Inherent Risk Aversion

“Ancient societies were full of slavery, custom, and law—systems that benefited elites but oppressed ordinary people.” — Cicero

What’s the point of a civilization that produced geniuses like Plato, Hegel, and even Macron (just kidding), if today’s creators are crushed by mediocre bureaucrats whose only mission is to stop others from creating?

Just as the Church once put scientists to the flame (or at least on trial), today Europe’s powers create convoluted laws that scare off entrepreneurs. Never has the gap between America’s vibrant, rebellious youth and Europe’s decaying rigidity been so wide. Brussels had a chance to break its mold but chose unbearable stubbornness instead.

The full implementation of the MiCA Act in late 2025 is a perfect expression of bureaucratic will, but a devastating blow to innovation.

MiCA was marketed as a “comprehensive framework,” but in Brussels, that usually means “comprehensive torment.” It did bring clarity—so much that industry players are fleeing.

MiCA’s core flaw is a category error: it treats crypto founders as sovereign banks. Compliance costs are so high that crypto firms are set up to fail.

Norton Rose Fulbright published a memo objectively interpreting the law.

Structurally, MiCA is exclusionary, putting digital assets into tightly regulated categories (Asset-Referenced Tokens—ARTs and E-Money Tokens—EMTs), while requiring crypto asset service providers (CASPs) to follow an onerous compliance regime copied from MiFID II (originally only for financial giants).

Titles III and IV impose strict 1:1 liquid reserve requirements on stablecoin issuers and legally declare algorithmic stablecoins insolvent from inception, effectively banning them (which may itself be a major systemic risk; imagine Brussels declaring you illegal overnight?).

Furthermore, issuers of “significant” tokens (the infamous sARTs/sEMTs) face enhanced EBA supervision, with capital requirements making it economically impossible for startups to issue tokens. Now, without a top legal team and TradFi-level funding, you can’t even start a crypto business.

For intermediaries, Title V abolishes the concept of offshore or cloud-based exchanges. CASPs must set up a registered office in an EU member country, appoint resident directors who pass a “fit and proper” test, and implement segregated custody agreements. The “white paper” requirement (Article 6) turns technical documents into binding prospectuses, with strict civil liability for material misstatements or omissions—shattering the industry’s cherished anonymous corporate veil. Starting a crypto firm is now almost like starting a new bank.

Though the law introduces “passporting,” allowing a CASP authorized in one country to operate across the EEA without local re-authorization, this “harmonization” (a bad EU word) comes at a steep price.

It builds a regulatory wall only extremely well-capitalized institutions can scale, due to the high cost of AML/CFT integration, market abuse monitoring, and prudential reporting. MiCA doesn’t just regulate Europe’s crypto market—it effectively blocks nearly all crypto founders lacking legal and financial resources from entering the industry.

Regulatory Troubles in European Countries

Beyond EU law, Germany’s BaFin has become a mediocre compliance machine, only efficient at processing paperwork in this dying sector. Meanwhile, France’s ambition to be Europe’s “Web3 hub” (the so-called “startup nation”) has hit its own wall. French startups aren’t coding—they’re fleeing. They can’t match America’s pragmatism or Asia’s relentless innovation, causing a talent drain to Dubai, Thailand, and Zurich.

But the real death knell is the ban on stablecoins. In the name of “monetary sovereignty,” the EU effectively banned non-euro stablecoins (like USDT), killing the only reliable part of DeFi. The global crypto economy runs on stablecoins, but Brussels forces Europeans to use illiquid “euro tokens”—unwanted even outside Schengen, creating a liquidity trap.

The ECB and ESRB have urged Brussels to ban “multi-region issuance,” i.e., treating tokens issued inside and outside the EU by global stablecoin issuers as interchangeable. The ESRB, chaired by ECB chief Christine Lagarde, warned that concentrated redemptions by non-EU holders of EU-issued tokens could “exacerbate run risk within the EU.”

Meanwhile, the UK plans to cap individual stablecoin holdings at £20,000… while shitcoins remain totally unregulated. Europe’s risk-avoidance strategy badly needs reform, or regulators may trigger a total collapse.

The reason is simple: Europe wants its citizens tied to the euro, unable to partake in the US economy or escape stagnation (or recession). As Reuters reported:

“The ECB warns that stablecoins could drain valuable retail deposits from eurozone banks, and any run on a stablecoin could have widespread implications for global financial stability.”

Utter nonsense!

Ideal Framework: The Swiss Model

Some countries, unburdened by partisan politics, dumb decisions, or outdated laws, have escaped the “over-” or “under-regulation” binary and found solutions that work for everyone. Switzerland is a prime example.

Swiss regulation is diverse yet efficient and industry-friendly—actual providers and users love it:

• Financial Market Supervision Act (FINMASA, 2007): Established FINMA as the unified, independent regulator, consolidating banking, insurance, and AML oversight.
• Financial Services Act (FinSA): Focuses on investor protection via strict codes of conduct, client classification (retail, professional, institutional), and transparency (basic disclosure documents), creating a “level playing field” for service providers (banks and independent asset managers).
• AML Act: The core anti-financial crime framework, applies to all financial intermediaries (including crypto CASPs), with basic compliance obligations.
• Distributed Ledger Technology Law (DLT-Law, 2021): A “package law” amending 10 federal acts (including Debt Law and Debt Enforcement Law), formally recognizing crypto assets’ legal status.
• VASP rules: Zero-tolerance FATF “travel rule” enforcement, with no minimum transaction exemption.
• Article 305bis of Swiss Criminal Code: Defines the crime of money laundering.
• CMTA standards: Published by the Capital Markets and Technology Association, not legally binding but widely adopted.

Regulatory actors include Parliament (federal law), FINMA (regulations and guidance), and FINMA-supervised self-regulatory organizations (SROs, e.g., Relai) which oversee independent asset managers and crypto intermediaries. The Money Laundering Reporting Office (MROS) reviews suspicious activity reports (SARs, as in TradFi) and forwards them to prosecutors.

That’s why the Zug Valley is the gold standard for crypto founders—the logical framework lets founders operate businesses with clear legal protection, reassuring users and banks willing to take some risk.

Go Forth, America!

The New World’s crypto-friendliness isn’t driven by an urge to innovate (France hasn’t put anyone on the moon), but by fiscal necessity. Having ceded Web2 to Silicon Valley in the ‘80s, Europe sees Web3 as just another tax base, not an industry to nurture.

This suppression is structural and cultural. With aging populations and unsustainable pension systems, the EU cannot tolerate an uncontrollable, competitive financial sector. It’s reminiscent of feudal lords imprisoning or killing local nobles to avoid unwanted competition. Europe has a terrifying instinct to destroy its own citizens’ interests just to prevent uncontrolled change—unlike the US, which thrives on competition, ambition, and a kind of Faustian will to power.

The MiCA Act isn’t a “growth” framework, but a death sentence. It’s designed to keep all eurozone citizens’ transactions under regulatory surveillance, guaranteeing the state a cut—like a fattened monarch bleeding the peasants dry. Europe is positioning itself as a global luxury colony, an eternal museum for Americans to gawk at a past that can’t be revived.

Switzerland and the UAE, among others, have shed historical and structural flaws. They don’t bear the burdens of maintaining a global reserve currency or suffer from the 27-nation bureaucracy that plagues the EU. By exporting trust through DLT Law, they attract foundational projects with core IP (Ethereum, Solana, Cardano). The UAE is close behind—no wonder the French are flocking to Dubai.

We’re entering an era of radical jurisdictional arbitrage.

The crypto industry will undergo geographic split: consumer-facing activity will stay in the US and Europe, fully KYC’ed, highly taxed, and integrated with TradFi; while the protocol layer will move to rationally regulated jurisdictions like Switzerland, Singapore, and the UAE.

User bases will remain global, but founders, VCs, protocols, and developers will have to consider leaving their home markets for more hospitable environments.

Europe’s destiny is to become a financial museum. It offers citizens a flashy but useless legal system, deadly to actual users. I wonder if Brussels’ technocrats have ever bought Bitcoin or made a cross-chain stablecoin transfer?

Crypto is now inevitably a macro asset, and the US will remain the world’s financial center. The US already has Bitcoin-denominated life insurance, crypto collateral, crypto reserves, constant VC funding for anyone with an idea, and a vibrant ecosystem for builders.

Anxious Conclusion

In sum, the “brave new world” Brussels is building is less a coherent digital framework than a clumsy Frankenstein’s monster—trying to graft 20th-century banking compliance onto 21st-century decentralized protocols, mostly designed by engineers oblivious to ECB emotions.

We must actively advocate a new regulatory regime—one that puts reality above administrative control—or we’ll strangle Europe’s already weak economy.

Unfortunately, crypto isn’t the only victim of this risk-averse obsession. It’s just the latest target for the overpaid, complacent bureaucratic class haunting our capital cities’ dull postmodern corridors. This ruling class’ strict regulation is due precisely to their lack of real-world experience. They’ve never gone through KYC, applied for a new passport, or obtained a business license; so, despite Brussels’ claims of tech-savvy governance, native crypto founders and users have to deal with stunning incompetence—people good for nothing but making harmful rules.

Europe must change course now. As the EU drowns in stifling red tape, America is clarifying how to “regulate” DeFi, moving toward a framework that works for everyone. The trend toward regulatory centralization has been clear since the FTX collapse.

Burned investors demand accountability; we must break out of the current “Wild West” cycle—meme coin mania, cross-chain bridge hacks, regulatory chaos. We need a structure that welcomes real capital (Sequoia, Bain, BlackRock, Citi, etc. are leading the way) while protecting end users from predatory capital.

Rome wasn’t built in a day, but this crypto experiment has been running for 15 years and its institutional foundations are still stuck in the mud. The window to build a functional crypto industry is closing fast; in war, hesitation and compromise only lead to total defeat. Both sides of the Atlantic must act swiftly, decisively, and comprehensively.

If this cycle really is ending, now is the best time to restore reputation and vindicate serious investors hurt by years of bad actors.

The exhausted traders of 2017, 2021, and 2025 demand a reckoning and final resolution for crypto; most importantly, we hope our favorite global assets can finally reach the historic new highs they deserve.