Build Faster

The church couldn't stop the printing press. The SEC can't stop crypto.
Sep 27, 20215 min read

Dear Bankless Nation,

Two completely different themes have dominated crypto in the recent news cycles.

  1. The regulators are here, and they’re not playing nicely
  2. The pace of innovation is rapidly accelerating

At first glance, these things seem completely unrelated, but as regulators come to implement their controls, the rapidly accelerating pace of innovation will incentivize regulators to take an even heavier-handed approach.

Nerf the SEC

It’s clear that Gary Gensler and the SEC are going to take a hardline approach to this industry. If you missed the Friday Weekly Rollup, we discussed this topic at length (here, if you missed it).

Raoul Pal summarized it well in this tweet thread:

TL;DR: It seems like the SEC wants everything to be a security. If they get their way, the definition of a security will be watered down, rather than impost meaningful reporting requirements on token issuers.

So far, the SEC has signaled an expansion of their jurisdiction to envelop all of crypto, without illustrating that they understand the implications of doing so. (Which is only natural for any governmental organization — justify your existence or get your funding pulled.)

Sure, you can appoint yourself as the regulatory agency that’s responsible for “regulating” crypto.

But be careful what you wish for Mr. Gensler.

What’s the more likely outcome? That you regulate crypto, or that crypto regulates you?

By its very design, crypto has won a thumb war with Nation-States. You can build Nation-States using crypto, but you can’t build crypto using Nation-States.

When a Nation-State attempts to regulate something that is bigger than itself, in order for it to be “successful”, it needs to redefine what it means to regulate something. What Raoul Pal is saying in his above thread is that if the SEC does indeed want to tick the box of “regulate crypto”, it’s going to need to seriously reduce the definition of what it means “to regulate”.

Remember, this industry is designed to be regulation-resistant. That’s what censorship resistance means.

Crypto is about to nerf the SEC.

Okay, SEC, so everything is security now… all the DeFi tokens, all the social tokens, all the gaming assets, all the JPEGs.

Whatcha gonna do about it?

In the time you’ve read this article, there have been 100 new tokens minted. Please, go ahead and spend 1,000 man-hours and $10M doing due diligence on these next 100 tokens you’re convinced are securities. Meanwhile, crypto just made 100 more.


In our Crypto Renaissance podcast (a Bankless Nation favorite), guest Josh Rosenthal illustrated how the Renaissance was fueled by the printing press. The printing press reduced the cost of spreading ideas down to near-zero, and these revolutionary ideas were able to break free from the top-down control of oppressive organized religion.

They were about to print ideas faster than religion was able to capture and control them. The printing press DDOS’d the Catholic Church, and it created one of the greatest wealth and cultural creation events in human history.

If the SEC wants to regulate crypto, its actions so far haven’t accounted for how we have a ‘security’-printing press in the form of ERC20 tokens. If the SEC wants to regulate crypto, it’s going to have to severely diminish what it means to ‘be regulated’, or else it won’t ‘be regulated’ at all.

Crypto-Gaming: Adding a Motor to the Printing Press

We just recorded an amazing podcast with A16z’s Arianna Simpson on the coming revolution to the gaming industry. It’s an episode you don’t want to miss, especially when so many of us in crypto have fond nostalgic memories of games like Diablo II or World of Warcraft, where playing the gaming and finding loot had meaningful in-game consequences.

Now with the integration of crypto assets into the same gaming environments we already know, “meaningful consequences” can migrate out of the game and into the real world.

Crypto gaming is going to take us from ~1,000 DeFi tokens and 100,000+ NFTs, to millions and millions of in-game tokens, both of the ERC20 and ERC721 categories.

Imagine this: You’re playing your favorite MMORPG. After you kill that really hard boss, he drops a Legendary Longsword of Flame. That item will have an issuer, its value will be based on the common enterprise of the team behind the game, and you may even expect it to go up in value. So it’s a security?

That MMORPG that you love?

It’s a security-token printing press.

1 Sword: Flametongue; adds fire damage to successful attacks | Senjata,  Pedang, Fakta zodiak
Can’t wait to hear how my new sword fits under SEC regulatory guidance.

Axie’s are the foundation for the Axie Infinity universe. They’re also capital assets (like the ones found on the NYSE!) because you can breed to Axie’s together in order to make a third, which also has a market value.

Does the SEC really want us to let them know every time an Axie mates?

DDOSing the Regulators

The strategy for getting through this phase of hostile crypto-regulation is simple.

Don’t stop. Instead, speed up.

It’s easy to say this from the armchairs of a writer at a media studio, and not a DeFi-team who’s trying to not go to jail, so I apologize for that. But when I look at the industry, I view it from a macro-level view. The builders who are frustrated by the SEC aren’t going to stop building, they’re just going to build differently or in different jurisdictions.

And now, we have more builders than we’ve ever had. Not only that, but crypto has more sub-sectors than it’s ever had before, which means more surface area for more builders.

As I said in last week’s opening note, a linear increase of builders creates an exponentially increasing rate of progress. While individual teams and orgs need to proceed with caution with regards to regulators, when you zoom out and look at the holistic body of crypto, we are simply brute-forcing the industry into success by integrating ourselves with the legacy world.

If you’ve gotten scared about the SEC, the treasury, or whatever regulatory body, remember that crypto has already won the war.

It won in 2009 when the first Bitcoin block was mined. It won again in 2015 when the first Ethereum block was mined. And it’s been winning every single new block that’s appended to the ledger.

These systems are designed to win. The regulators are going up against a system that is optimized to beat them.

Who do you think is going to capitulate to the other? The unstoppable, permissionless crypto economy, or one regulator-boi?

The regulators are waiting for the crypto industry to come knocking at their door, say we’re sorry, and then ask for permission.

Let’s keep them waiting.

Let’s keep building.

- David


Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.

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