Original Title: "The Year of the Token Economy Being Disproved"

Original Authors: Kaori, Sleepy.txt, Dongcha Beating

At the beginning of 2024, when the Bitcoin ETF was approved, many cryptocurrency practitioners jokingly referred to each other as "noble U.S. stock traders." However, when the New York Stock Exchange planned to develop stock on-chain and trade 24/7, the crypto community belatedly realized that the crypto industry had not taken over Wall Street.

On the contrary, Wall Street had been betting on integration from the start and has slowly transitioned into an era of two-way acquisitions, where crypto companies buy licenses, clients, and compliance capabilities from traditional finance, while traditional finance acquires technology, pipelines, and innovation capabilities from crypto. Both sides are infiltrating each other, and the boundaries are gradually disappearing. In three to five years, there may no longer be a distinction between crypto companies and traditional financial companies, only financial companies.

This integration and assimilation is being legally supported by the "Digital Asset Market Clarity Act" (hereinafter referred to as the CLARITY Act), which aims to reshape a wild-growing crypto space into a form familiar to Wall Street. The first to be reformed is the concept of token rights, which is not as favored as stablecoins in the crypto space.

The Era of Choice

For a long time, practitioners and investors in the crypto space have been in a state of anxiety, often subjected to law enforcement-style regulation by various government departments. This tug-of-war not only stifles innovation but also puts investors in an awkward position, as they hold tokens but lack rights. Unlike stockholders in traditional financial markets, token holders do not have the legal protections of informed consent or the right to pursue insider trading claims against project parties.

Therefore, when the CLARITY Act passed with a high vote in the U.S. House of Representatives last July, the entire industry had high hopes for it. The core demand of the market was very clear: to define whether tokens are digital commodities or securities, and to end the long-standing jurisdictional dispute between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The Act stipulates that only assets that are fully decentralized and have no actual controllers can be classified as digital commodities, falling under the jurisdiction of the CFTC, just like gold and soybeans. Any asset that shows signs of centralized control or is financed through promises of returns is classified as a restricted digital asset or security, falling under the strict jurisdiction of the SEC.

For networks like Bitcoin and Ethereum, which no longer have actual controllers, this is a positive development. However, for the vast majority of DeFi projects and DAOs, this is almost a disaster.

The Act requires any intermediary involved in digital asset transactions to register and implement strict anti-money laundering (AML) and know your customer (KYC) procedures. This is an impossible task for DeFi protocols operating on smart contracts.

The summary document of the Act explicitly mentions that certain decentralized financial activities related to the operation and maintenance of blockchain networks will be exempt, but the enforcement authority for anti-fraud and anti-manipulation remains. This is a typical regulatory compromise, allowing coding and front-end interface development to exist, but once it touches on transaction matching, profit distribution, and intermediary services, it must fall under a heavier regulatory framework.

Because of this compromise, the CLARITY Act did not truly reassure the industry after the summer of 2025, as it forced all projects to answer a brutal question—what exactly are you?

If you claim to be a decentralized protocol and comply with the CLARITY Act, your token cannot have actual value. If you do not want to shortchange token holders, you must acknowledge the importance of equity structure and allow the token to face scrutiny under securities law.

People Over Tokens

This choice will be repeatedly played out in 2025.

In December 2025, a merger announcement triggered vastly different reactions in Wall Street and the crypto community.

Circle, the world's second-largest stablecoin issuer, announced the acquisition of the core development team of the cross-chain protocol Axelar, Interop Labs. In the eyes of traditional financial media, this was a standard talent acquisition case, with Circle gaining a top cross-chain technology team to enhance the circulation capability of its stablecoin USDC in a multi-chain ecosystem. As a result, Circle's valuation remained stable, and the founders and early equity investors of Interop Labs left satisfied with cash or Circle's shares.

However, in the secondary market for cryptocurrencies, this news triggered a panic sell-off.

Investors dissecting the transaction terms found that Circle's acquisition was limited to the development team and explicitly excluded the AXL token, the Axelar network, and the Axelar Foundation. This discovery instantly shattered previous positive expectations. Within hours of the announcement, the AXL token not only erased all gains made due to acquisition rumors but also fell further into a deep decline.

For a long time, investors in crypto projects had assumed a narrative that buying tokens equated to investing in the startup. With the efforts of the development team, the usage of the protocol would increase, and the value of the tokens would rise accordingly.

Circle's acquisition shattered this illusion, declaring from both legal and practical perspectives that the development company (Labs) and the protocol network (Network) are two completely separate entities.

"This is legal robbery," wrote an investor who had held AXL for over two years on social media. But he could not sue anyone, as the legal disclaimers in the prospectus and white paper never promised that the tokens had any residual claim rights against the development company.

Looking back at the acquisitions of crypto projects with tokens in 2025, these acquisitions typically involved the transfer of technical teams and underlying infrastructure but did not include token rights, causing significant impact on investors.

In July, Kraken's Layer 2 network Ink acquired the engineering team and underlying trading architecture of Vertex Protocol. Subsequently, Vertex Protocol announced the closure of its services, and its token VRTX was abandoned.

In October, Pump.fun acquired the trading terminal Padre. At the same time, the project party announced that the PADRE token was void and had no future plans.

In November, Coinbase acquired the trading terminal technology built by Tensor Labs, which also did not involve the rights to the TNSR token.

At least in this wave of mergers in 2025, more and more transactions tended to buy only teams and technology, disregarding tokens. This has also made many investors in the crypto industry indignant, "Either give tokens the same value as stocks, or don't issue tokens at all."

The Dividend Dilemma of DeFi

If Circle's tragedy was caused by external acquisitions, then Uniswap and Aave have demonstrated the internal conflicts of interest they have faced at different stages of development in the crypto market.

Aave, long regarded as the king of DeFi lending, fell into a fierce internal war over who gets the money at the end of 2025, with the conflict centered on the protocol's front-end revenue.

The vast majority of users do not interact directly with the smart contracts on the blockchain but operate through the web interface developed by Aave Labs. In December 2025, the community keenly noticed that Aave Labs had quietly modified the front-end code to divert the high fees generated from token exchange transactions on the website to Labs' own company account, rather than the treasury of the decentralized autonomous organization Aave DAO.

Aave Labs' reasoning aligns with traditional business logic: "We built the website, we pay the server fees, we bear the compliance risks, and the monetization of traffic should belong to the company." But from the perspective of token holders, this is a betrayal.

"Users come for the decentralized protocol Aave, not for your HTML webpage." This debate led to a rapid evaporation of $500 million in Aave's token market value.

Although both sides eventually reached some compromise under immense public pressure, with Labs promising to propose a plan to share non-protocol revenue with token holders, the rift could not be mended. The protocol may be decentralized, but the traffic entry point remains centralized. Whoever controls the entry point holds the actual taxation power over the protocol economy.

Meanwhile, the dominant decentralized exchange Uniswap had to choose self-castration for compliance.

Between 2024 and 2025, Uniswap finally advanced the highly anticipated fee switch proposal, which aimed to use part of the protocol's trading fees to repurchase and burn UNI tokens, attempting to transform the tokens from useless governance votes into deflationary income-generating assets.

However, to avoid being classified as securities by the SEC, Uniswap had to undertake extremely complex structural separations, physically isolating the entity responsible for dividends from the development team. They even registered a new type of entity in Wyoming called DUNA, a decentralized non-profit association, in an attempt to find a niche on the edge of compliance.

On December 26, Uniswap's proposal to activate the fee switch was ultimately approved in a governance vote, with core content including the destruction of 100 million UNI and Uniswap Labs shutting down front-end fees, further focusing on protocol layer development.

Uniswap's struggles and Aave's internal war point to an awkward reality: the dividends investors crave are precisely the core basis for regulators to classify something as a security. To give tokens value invites SEC penalties; to avoid regulation, tokens must remain in a state of having no actual value.

Empty rights mapping, and then what?

When we try to understand the token rights crisis of 2025, it may be helpful to look at more mature capital markets. There exists a highly enlightening reference: the American Depositary Shares (ADS) of Chinese concept stocks and the Variable Interest Entity (VIE) structure.

If you buy Alibaba (BABA) stock on NASDAQ, seasoned traders will tell you that you are not buying direct equity in the entity operating Taobao in Hangzhou, China. Due to legal restrictions, you hold rights in a holding company based in the Cayman Islands, which controls the operating entity in China through a series of complex agreements.

This sounds very much like some altcoins, where what you buy is a kind of mapping rather than the physical asset itself.

However, the lesson of 2025 tells us that there is a significant difference between ADS and tokens: legal recourse.

Although the ADS structure is convoluted, it is built on decades of trust in international commercial law, a well-established auditing system, and the tacit understanding between Wall Street and regulators. Most importantly, ADS holders have legal residual claim rights. This means that if Alibaba is acquired or privatized, the acquirer must legally process and exchange your ADS for cash or equivalent.

In contrast, tokens, especially those governance tokens that were once highly anticipated, exposed their essence during the wave of mergers in 2025: they are neither on the liability side of the balance sheet nor on the equity side.

Before the CLARITY Act was implemented, this fragile relationship was maintained by community consensus and bull market faith. Developers hinted that tokens were stocks, and investors pretended they were doing VC. But when the hammer of compliance fell in 2025, everyone began to face the reality that under the traditional corporate law framework, token holders are neither creditors nor shareholders; they are more like fans who purchased expensive membership cards.

When assets can be traded, rights can be split. When rights are split, value will gravitate towards the side that is most legally recognized, most capable of carrying cash flow, and most enforceable.

In this sense, the crypto industry of 2025 did not fail; it was incorporated into financial history. It began to accept the judgments of capital structure, legal texts, and regulatory boundaries, just like all mature financial markets.

As crypto converges with traditional finance becomes an irreversible trend, a sharper question arises: where will the industry's value flow next?

Many believe that integration means victory, but historical experience often suggests otherwise. When a new technology is accepted by an old system, it may gain scale but may not retain the originally promised distribution methods. The old system excels at taming innovation into forms that are regulatory, account-able, and balance-sheet-able, firmly nailing residual claim rights to the existing rights structure.

The compliance of crypto may not return value to token holders but is more likely to return value to the parts familiar to the law: companies, equity, licenses, regulated accounts, and contracts that can be liquidated and enforced in court.

Token rights will continue to exist, just as ADS will continue to exist; they are both rights mappings allowed to be traded in financial engineering. But the question is, which layer of mapping are you actually buying?

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