Over the years, we have seen many trends such as ICOs, ICOs, security token offerings, decentralized independent organizations and many more, but none of them have gone mainstream. Undoubtedly, the concept of decentralized financing has its advantages, but since the factors that drowned its predecessors persist, we have reason to believe that DeFi will not last long.
The window of opportunity has shrunk for several reasons: first due to fraud in the room; Second, the willingness of regulators to “save” the market from offenders by introducing old bureaucracies and new restrictions; Third, the misconception that new cryptographic companies are meaningless under traditional bureaucratic regulation, because fintech is in itself a response to their inefficiency and limitations. However, the idea of creating a whole new approach to services based on cryptography has not yet taken hold.
Road workers return
During the first boom in coin supply in 2017, many unscrupulous entrepreneurs tried to capitalize on the emerging industry for easy money. Now it seems that these entrepreneurs are making a comeback. There is a so-called “statute of limitations” that exempts criminals from punishment if they are not caught. At the end of the time limit set for a specific crime, the courts’ jurisdiction ceases.
In the United States, for example, the limitation period of three to four years depends on the state. This means that attackers who have rejected since committing the fraud during the ICO boom in 2017, as well as those who lost the opportunity to do so, can return to the second round. Furthermore, they intuitively understand that the opportunity may be short, and therefore they are more likely to act aggressively and use more sophisticated deceptions.
The organizers are more willing
The rules for securities and exchanges in different countries define the formal rules and procedures for financial markets and instruments, which include registration, licensing, due diligence, Know Your Customer obligations and much more. The possibility of fraud and violation of these rules leads us to a different assessment: At some point, the authorities may investigate both fraudsters for committing crimes and honest businessmen for formal non-compliance.
After many years of exploring new technology and emerging markets, regulators are now more knowledgeable than ever.
Token sales have disappeared from the scene due to two factors: fraud that casts a shadow over the emerging industry, regulators that require compliance, and infringers. Regulators are the heroes who protect society from fraudulent activity – we will hear this story when so many gullible small investors find themselves cheated and demand justice.
Sublimation is not an effective response to regulator pressure
You may think that complying with rules and procedures is the best strategy for a growing cryptocurrency market. But the truth is that outdated rules restrict new industries. Fintech, and especially decentralized economics, is in fact the answer to an inefficient, complex and outdated bureaucratic system.
The new token industry provided easy ways to achieve crowdsourcing as an alternative to venture capital funds and traditional financial markets, but bureaucratic rules that were introduced later resulted in declining token sales.
Instead, some parts of the market tried to respond by inventing a secure token as an alternative to the ICO. STO intends to wrap newly launched cryptocurrencies in “appropriate” business formats and procedures, but they have not become ordinary. People remember many successful ICOs – Ether (ETH) itself is the result of a mass sale, but who knows what a successful STO can compare to Ethereum? The reason is clear: the market does not want to deal with heavy bureaucracy.