Original Title: "The Year the Token Economy Was Disproven"
Original Authors: Kaori, Sleepy.txt, Beating
At the beginning of 2024, when the Bitcoin ETF was approved, many cryptocurrency professionals jokingly referred to each other as "esteemed U.S. stock traders." But when the New York Stock Exchange (NYSE) announced plans to develop blockchain-based stock trading and enable 24/7 trading—integrating tokens into the traditional financial agenda—people in the crypto community only belatedly realized that the blockchain industry had not actually captured Wall Street.
On the contrary, Wall Street has been betting on integration from the beginning, and it is now gradually moving into an era of mutual acquisitions. Cryptocurrency companies are buying traditional financial licenses, customers, and compliance capabilities, while traditional financial institutions are acquiring blockchain technologies, infrastructure, and innovative capacities. The two sides are increasingly overlapping, and the boundaries are gradually disappearing. In three to five years, there may no longer be a distinction between cryptocurrency companies and traditional financial firms—there will just be financial companies.
This integration and assimilation is being carried out under the legal framework of the "Clarity for the Digital Asset Market Act" (hereinafter referred to as the CLARITY Act), transforming a wild-growing cryptocurrency market into a form familiar to Wall Street at the institutional level. The first target of this reform is the concept of "coin rights," a purely cryptocurrency-related idea that lacks the popularity of stablecoins.
The Era of Two Choices
For a long time, professionals and investors in the cryptocurrency industry have been in a state of anxiety due to the lack of clear legitimacy and proper recognition. They are often subject to regulatory crackdowns by local government authorities. This tug-of-war not only stifles innovation but also puts token buyers in an awkward position, as they hold tokens yet possess no real legal rights. Unlike stock investors in traditional financial markets, token holders have neither legally protected rights to information nor the ability to seek redress for insider trading by project teams.
Therefore, when the CLARITY Act was passed with a large majority in the U.S. House of Representatives last July, the entire industry placed high hopes on it. The core demand from the market was very clear: to define whether tokens are digital commodities or securities, and to end the years-long jurisdictional dispute between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
The bill stipulates that only assets that are fully decentralized and have no actual controller can be recognized as digital commodities, subject to the jurisdiction of the CFTC, just like gold or soybeans. Any assets showing signs of centralization or raising funds by promising returns will be uniformly classified as restricted digital assets or securities, falling under the strict jurisdiction of the SEC.
This is positive news for networks like Bitcoin and Ethereum, which have long since lost their central controllers. However, for the vast majority of DeFi projects and DAOs, this is almost a catastrophic disaster.
The bill requires any intermediaries involved in digital asset transactions to register and implement strict anti-money laundering (AML) and know-your-customer (KYC) procedures. For decentralized finance (DeFi) protocols operating through smart contracts, this is an impossible task to fulfill.
The bill summary document clearly states that certain decentralized finance activities related to the operation and maintenance of blockchain networks will be exempted, but enforcement authority against fraud and market manipulation will still be retained. This is a typical regulatory compromise, allowing activities such as coding and developing front-end interfaces to exist, but once they involve trade matching, profit distribution, or intermediation services, they will fall under a stricter regulatory framework.
Precisely because of this compromise, the CLARITY Act does not truly reassure the industry after summer 2025, as it forces all projects to once again confront a harsh question—what exactly are you?
If you claim to be a decentralized protocol and comply with the CLARITY Act, your tokens cannot have real value. If you do not want to disadvantage token holders, you must acknowledge the importance of equity structure and subject your tokens to scrutiny under securities laws.
People, not money.
Such choices will be repeated again and again in 2025.
In December 2025, a merger and acquisition announcement triggered starkly different reactions on Wall Street and in the cryptocurrency community.
The world's second-largest stablecoin issuer, Circle, announced the acquisition of Interop Labs, the core development team behind the cross-chain protocol Axelar. In the eyes of traditional financial media, this is a standard talent acquisition case: Circle has secured a top-tier cross-chain technology team to enhance the circulation of its stablecoin, USDC, across multiple blockchain ecosystems. As a result, Circle's valuation has been solidified, while the founders of Interop Labs and early equity investors have exited contentedly with cash or shares in Circle.
However, in the secondary market of cryptocurrencies, this news triggered a panic sell-off.
Investors, upon dissecting the transaction terms, discovered that Circle's acquisition was limited to the development team, explicitly excluding the AXL token, the Axelar network, and the Axelar Foundation. This revelation instantly shattered previous bullish expectations. In the hours following the announcement, the AXL token not only erased all previous gains driven by acquisition rumors but also plunged further into a deep decline.
For a long time, investors in crypto projects have defaulted to a narrative that purchasing tokens is equivalent to investing in the startup company itself. As development teams work hard, protocol usage increases, and the value of the tokens rises accordingly.
The acquisition of Circle shattered this illusion, legally and practically declaring that the development company (Labs) and the protocol network (Network) are two entirely separate entities.
"This is legal robbery," wrote an investor who had held AXL for over two years on social media. However, he could not sue anyone, as the token was never promised to have residual claims on the development company in the legal disclaimer sections of the prospectus and whitepaper.
Looking back at the 2025 acquisitions of token-based crypto projects, these acquisitions typically involved the transfer of technical teams and underlying architectures, but not the token rights, causing significant impact on investors.
In July, Ink, the Layer 2 network under Kraken, acquired the engineering team and underlying trading infrastructure of Vertex Protocol. Subsequently, Vertex Protocol announced the shutdown of its services, and its token VRTX was deprecated.
In October, Pump.fun acquired the trading terminal Padre. Alongside the announcement, the project team declared that the PADRE token would be invalidated with no future plans.
In November, Coinbase acquired the trading terminal technology built by Tensor Labs, and this acquisition also does not involve the rights or interests of the TNSR token.
At least in the wave of M&A activity by 2025, an increasing number of deals are trending toward acquiring only the teams and technologies, while discarding the tokens. This has caused growing anger among crypto industry investors, who say, "Either give tokens the same value as stocks, or don't bother issuing a token at all."
The Dividend Dilemma in DeFi
If Circle is a tragedy caused by external acquisitions, then Uniswap and Aave have demonstrated the internal conflicts of interests that have long existed within the crypto market at different stages of its development.
Aave, long regarded as the leading project in the DeFi lending space, found itself embroiled in a fierce internal conflict by the end of 2025 over who should control the funds, with the focal point being the protocol's front-end revenue.
Most users do not directly interact with smart contracts on the blockchain but instead operate through the web interface developed by Aave Labs. In December 2025, the community keenly noticed that Aave Labs had quietly modified the frontend code, redirecting high transaction fees generated from token swaps on the website into the Labs' own company account, rather than into the treasury of the decentralized autonomous organization, Aave DAO.
Aave Labs' reasoning aligns with traditional business logic: we built the website, we cover the server costs, and we bear the compliance risks. Therefore, monetizing traffic should naturally belong to the company. However, from the perspective of token holders, this appears as a betrayal.
"Users are coming for the Aave decentralized protocol, not for your HTML website." This argument led to a $500 million loss in Aave's token market value within a short period.
Although both sides eventually reached some kind of compromise under immense public pressure, with Labs committing to propose a plan to share off-protocol revenue with token holders, the rift had already become irreparable. The protocol may be decentralized, but the traffic entry points remain centralized. Whoever controls the entry points effectively holds the power to tax the protocol's economy.
At the same time, Uniswap, the dominant decentralized exchange platform, has had to choose self-censorship in order to comply with regulations.
Between 2024 and 2025, Uniswap finally moved forward with the highly anticipated fee toggle proposal, which aims to allocate a portion of the protocol's transaction fees to repurchase and burn UNI tokens, attempting to transform the token from a useless governance vote into a deflationary income-generating asset.
However, to avoid SEC's security classification, Uniswap had to implement an extremely complex architectural separation, physically isolating the entity responsible for dividend distribution from the development team. They even registered a new type of entity in Wyoming called DUNA, a decentralized, non-corporate, non-profit association, attempting to find a place to operate while staying on the edge of compliance.
On December 26, Uniswap's proposal to enable the transaction fee switch passed its final governance vote. The core contents also included burning 100 million UNI tokens, and Uniswap Labs closing its front-end fee collection, with a further focus on protocol-layer development.
Uniswap's struggles and Aave's internal conflict both point to an awkward reality: the dividends investors crave are precisely the core criteria regulators use to define securities. Attempting to assign value to tokens invites SEC penalties; yet to avoid regulation, tokens must remain valueless.
Having only a rights mapping, and then what?
When we try to understand the cryptocurrency rights crisis of 2025, we might look to more mature capital markets for insight. There, we find a highly instructive reference: American Depositary Shares (ADS) and Variable Interest Entity (VIE) structures of Chinese companies listed in the U.S.
If you buy shares of Alibaba (BABA) on NASDAQ, experienced traders will tell you that you are not directly purchasing equity in the actual entity that operates Taobao in Hangzhou, China. Due to legal restrictions, what you hold is an interest in a holding company incorporated in the Cayman Islands. This Cayman company controls the operating entities within China through a series of complex contractual agreements.
This sounds very similar to some copycat coins, where you're buying a kind of mapping rather than the physical item itself.
But the 2025 lesson tells us that there is a significant difference between ADS and tokens: legal recourse.
Although the ADS structure may seem roundabout, it is built upon decades of trust in international commercial law, a well-established auditing system, and an unspoken understanding between Wall Street and regulators. Most importantly, ADS holders legally possess residual claim rights. This means that if Alibaba is acquired or taken private, the acquirer must follow legal procedures to exchange cash or equivalent assets for the ADSs you hold.
In contrast, tokens—especially governance tokens that were once highly anticipated—revealed their true nature during the merger and acquisition wave of 2025. They appeared neither on the liability side nor the equity side of the balance sheet.
Before the enactment of the CLARITY Act, this fragile relationship was maintained by community consensus and the belief in bull markets. Developers implied that tokens were equivalent to stocks, while investors pretended they were acting as venture capitalists. However, when the hammer of compliance fell in 2025, everyone finally came to face reality: under the traditional corporate law framework, token holders are neither creditors nor shareholders. Instead, they resemble fans who have purchased expensive membership cards.
When assets can be traded, rights can be divided. When rights are divided, value tends to concentrate on the side that is most legally recognized, best able to carry cash flows, and most enforceable.
In this sense, the cryptocurrency industry in 2025 has not failed, but has been incorporated into financial history. It has begun, like all mature financial markets, to undergo scrutiny regarding capital structure, legal documentation, and regulatory boundaries.
As encryption approaches traditional finance and becomes an irreversible trend, a more acute question arises: where will the industry's value flow next?
Many people believe that integration means victory, but historical experience often tells a different story. When a new technology is adopted by an old system, it may achieve scale, but it does not necessarily retain the original distribution model it promised. What the old system is most adept at doing is taming innovation into a form that is regulable, accountably measurable, and balance-sheet compatible, while firmly anchoring the residual claim rights within the existing power structure.
The compliance of encryption may not necessarily return value to token holders, but is more likely to return value to parts that are familiar to the legal system—companies, equities, licenses, regulated accounts, and contracts that can be liquidated and enforced in court.
Token rights will continue to exist, just as ADS (American Depositary Shares) will continue to exist; they are both mappings of rights allowed for trading in financial engineering. However, the question is, which layer of mapping are you actually purchasing?
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