Can Trump’s re-election bring a real regulatory breakthrough to the crypto industry?

One, "Noise" and "Signal": Regulatory Optimism in the Market

After Trump's re-election, many market analysts and crypto industry leaders expressed optimism about the future regulatory environment. The crypto division of the renowned venture capital firm a16z (Andreessen Horowitz) recently published a view that crypto project founders can now be more confident in experimenting with innovation, especially in Token issuance and community building, with many plans that were previously shelved due to regulatory concerns now potentially able to be restarted.

a16z emphasized that there is now an opportunity for constructive dialogue with regulatory and legislative authorities, which is expected to gradually bring regulatory clarity to the blockchain industry. This attitude seems to affirm that regulatory agencies may adopt more inclusive and innovation-driven policies. However, a16z also reminded that although the regulatory environment may become more flexible, it does not mean that crypto companies can completely escape the constraints of the law, especially for projects with centralized features, which may still face strict scrutiny.

a16z also pointed out that over the next few months, there may be a lot of "hot opinions" and various speculations about regulation and legislation, but most of them are likely to be noise and unable to accurately predict the direction of regulation. Although it is still unclear what specific changes will occur in the future, one thing is certain: the new government policies will 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 regulatory agencies may indeed give innovators more freedom within the existing framework to explore various blockchain application scenarios; the noise is that many comments may over-interpret the short-term regulatory relaxation and overlook the complexity of legal operations.

Two, 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 be entering a new "dawn", and many entrepreneurs can boldly use Tokens to distribute project control rights and build communities. As one of the most controversial financial instruments in the crypto ecosystem, Tokens have been in a regulatory gray area in recent years - are Tokens securities or not? How to prevent them from becoming tools for speculation and illegal financing? These questions have always been the focus of regulatory authorities.

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 diminished as a result. The "Token Issuance Guidelines" mentioned by a16z are still very valuable references, especially for founders to consider whether their Token model relies on the trust of a centralized entity. This means that any project dependent on centralization will still face strict scrutiny in the future. This is particularly important for the development of Web3, as it emphasizes the core position of decentralization in compliance.

Although the future regulatory environment may be more relaxed, the basic principle of "where there is trust, there is regulation" still applies. This means that entrepreneurs need to continue to work to reduce the centralization dependence in their projects, thereby reducing regulatory risks. At the same time, a16z also stated that next year they will continue to promote a clear regulatory framework, encouraging and supporting innovation and decentralization.

III. Changes and Continuities in US Regulatory Trends: From Wyoming to the Nationwide

Aiying particularly noted that a16z mentioned that they will soon release new guidelines on the use of "Decentralized Unincorporated Non-Profit Associations (DUNA)", a legal innovation that can help projects establish entities in the US while reducing the liability of token holders, managing tax and compliance requirements. This innovative structure, especially in blockchain-friendly states like Wyoming, may provide a solution for projects that want to establish a legal identity but avoid liability. However, whether this legal structure can be recognized by other states or even the federal government remains to be seen.

In recent years, Wyoming has been seen as a "testing ground" for the crypto industry, with its DAO laws providing legal identity guarantees for many decentralized organizations. However, whether Wyoming's innovations can be promoted nationwide and whether they can be recognized by federal regulators is a question that entrepreneurs must seriously consider in the coming year. Aiying believes that the development of the US crypto industry depends not only on the "pioneering" of local governments, but also on whether the federal government can adopt an open-minded attitude towards these experiments.

a16z also emphasized that they will soon release detailed guidelines on DUNA to facilitate token holders' activities in the US, reduce their tax and compliance burdens, and promote more economic activities. These initiatives, combined with Wyoming's unique position in DAO laws, may bring new development opportunities for crypto projects in the US, but the effect remains to be seen.

IV. Conclusion: Opportunities and Responsibilities of Regulation

The regulatory changes after Trump's re-election can be seen as a new opportunity for the crypto industry, but we also need to be vigilant about potential legal risks. The relaxation of regulation may provide more room for innovation, but it does not mean that compliance requirements can be ignored. From Aiying's perspective, the wisest approach for entrepreneurs in the current environment is to actively embrace decentralization, minimize the centralized features of their projects, and ensure the transparency and legitimacy of their projects. At the same time, entrepreneurs in the industry should also closely follow the new legal guidelines that will be released, such as DUNA, and find appropriate legal structures to reduce risks.

Referring to Aiying's previous article "[Case Law Insights] The Key Strategy Behind the Bancor DeFi Project Lawsuit, How Can Web3 Projects Avoid US Jurisdiction?", to avoid US jurisdiction as much as possible, the key is to take a series of measures to ensure that the project is as decoupled as possible from US laws and regulations. The reason why the Bancor project was able to successfully avoid the jurisdiction of the US courts is mainly because its operating entity and founders are located in Israel and Switzerland, and its project activities mainly take place outside the US. This allowed 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. Establish the company in a country outside the US

• Like Bancor, register and operate the company in other jurisdictions, such as Switzerland, Israel or other countries that are more friendly to crypto projects. This can effectively avoid the project being directly subject to US legal jurisdiction.

2. Ensure that the founders and team are not in the US

• Bancor's founders and key team members are all outside the US. If the founders and team are in the US, they will automatically be subject to US law.

3. Avoid providing services to US investors

• Restrict the participation of US investors: Bancor explicitly stated that it does not provide services to US citizens or residents, and strictly limits their participation in token sales. You can use user agreements, KYC (Know Your Customer) procedures, geo-blocking technologies, etc. to ensure that US investors cannot participate in token sales or use your platform.
• Geo-blocking: Use IP address filtering and technical means to block US users from accessing the project website or participating in token sales. This technical measure can reduce the exposure of your project in the US market.

4. Do not promote in the US

• Like Bancor, avoid any form of marketing or promotion in the US. Ensure that the project's promotional activities are not carried out through US social media, advertising platforms or news channels, so as not to attract the attention of US investors.

5. Use the "Regulation S" exemption

• If you cannot completely avoid contact with the international market, you can use the Regulation S exemption in US securities law like Bancor. Regulation S allows securities offerings outside the US, but requires you to ensure that these securities do not flow back to the US. This can reduce conflicts with US securities laws.

6. Design tokens to avoid being viewed as securities

• Ensure that the token design is more viewed as a "utility token" rather than an investment tool. This can be achieved by avoiding excessive promises of profits or returns, and emphasizing the use function of the token on the platform. Bancor avoided the token being viewed as a security by providing liquidity functions rather than just as an investment tool.

7. Choose non-US legal systems and dispute resolution mechanisms

• In user agreements and token sale contracts, clearly specify the application of non-US legal systems and choose non-US dispute resolution mechanisms.

Aiying will continue to provide in-depth interpretation and recommendations on the global compliance environment for Web3 entrepreneurs, helping the industry find the best balance between compliance and innovation.

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