This is part one of a three-part series, where I’ll cover:

• How regulations block new investment opportunities
• Why new crypto investments are heading offshore from the USA
• How you can invest in them

Sound good? Let’s dive in.

I’m now in my third crypto cycle. I didn’t engage much in the first, but I timed the 2019 bottom and earned over 1,000% on my investments in the second cycle, growing my portfolio to seven figures.

During that time, I worked as an Associate at a top-tier financial regulatory law firm, where I advised crypto issuers, exchanges, OTC desks, and venture funds. For this cycle, I’m predicting bitcoin will outshine other assets thanks to macroeconomic trends. But I also expect a fresh wave of new crypto assets to hit the market in early 2025, and they might perform even better than bitcoin.

How Regulation Hurts New Investments

The biggest obstacle for crypto entrepreneurs isn’t a lack of ideas. It’s off-chain regulation.

Building on-chain today is tough—there’s no equivalent to QuickBooks, Stripe, AWS, or Shopify for crypto yet. It’s hard to build without the right tools. Business will come, though. The advantages of having your business’ equity, payments, and services all working together in real-time on the same database are literally unknowable. Compare that to the current mess for a digital business—quarterly reconciling of records from lawyers' computers, accountants' filings, local governments' registries, bank's SWIFT networks, and AWS's servers.

The on-chain future will create efficiency and spawn countless new businesses, opening up exciting investment opportunities. Think of the next generation of Stripes, QuickBooks, and AWS for crypto.

So, why aren’t these businesses popping up now? The short answer: regulation. The web started gaining steam in 1995, but it took a decade for the NASDAQ companies we know today to be founded. The slowdown in crypto? Mostly due to regulation.

Regulation: A Major Speed Bump

As I mentioned in a previous post, off-chain regulation acts like a form of censorship, while on-chain crypto is built to resist it. When crypto faces hurdles, they often stem from regulation.

Let’s say I want to put my consulting business on-chain. I’d want to accept payments in USDT from clients, and in exchange, they’d get access to our crypto consulting service, complete with a software license to use the platform.

Sounds straightforward, right? Well, here’s where the regulatory roadblocks come in.

Accepting USDT Payments

We don’t want our customers manually entering payment details—mistakes happen, and they’ll forget to pay their subscriptions on time. Instead, we need a smart contract that simplifies the process, like a one-click payment system. Just like web2 companies use Stripe, we need something similar for on-chain payments.

So, why isn’t there an on-chain version of Stripe yet? Here’s the issue: companies like Stripe are considered financial institutions. They’re required to comply with the USA Patriot Act and other regulations, meaning they must verify the identity (KYC) of anyone sending or receiving funds. Stripe accepts debit and credit cards, allowing them to piggyback on the KYC process of the card issuer.

But for USDT payments, there’s no KYC’d credit card. This means customers would need to whip out their passports every time they pay. That’s awkward, and people aren’t keen to link their real-world identities with their crypto holdings for obvious security reasons.

When (not if) that data gets breached, hackers would know that this person, with these assets, lives at this address. Cue a "wrench attack"—a physical assault to steal crypto. This, by the way, is why privacy tools like Tornado Cash are so essential.

These KYC requirements block on-chain payment processing, which in turn blocks businesses like mine and discourages potential customers.

Possible solutions?

• Reduce or remove KYC requirements (not likely).
• Exempt crypto assets from KYC (also unlikely).
• KYC’d credit cards tied to self-custody wallets (promising functionally but security risks remain).
• Zero-knowledge KYC (seemingly near-perfect solution, but will take time to diffuse into the industry).

Sending a License

Once we receive USDT from a somehow-KYC’d customer, we’d want to issue them a license to use our service. Smart contracts could handle this easily, sending an NFT that grants access to our platform for a year. When the membership is up, the system could renew their access by charging more USDT and issuing a new NFT.

As a business, we’d love this. Customers couldn’t share their access because only the person with the NFT in their wallet could log in. And if they didn’t want to use the service anymore, they could sell the NFT on a marketplace like OpenSea, allowing someone else to join at a discount.

However, because the NFT would (a) be transferable and (b) fluctuate in value based on our businesses efforts, the SEC would likely treat it as a security. This would mean:

• We’d need an expensive IPO to issue these NFTs publicly.
• Only SEC-registered brokers could sell them (which don’t exist for NFTs).
• More KYC hurdles—again requiring passport verification.

This stifles the entire service and the ecosystem of service providers that would have formed around it.

Possible solutions?

• Remove the accredited investor requirement (unlikely).
• Allow retail investors to self-elect as accredited (unlikely short term, near-inevitable long-term).
• Exempt crypto assets from securities regulation (necessary).

In my next post, I’ll explain how regulations differ globally and how that impacts where on-chain entrepreneurship will originate.