Jurisdictional Arbitrage.
Jurisdictional Arbitrage.
The future of organizations. Thank you Binance.
#Crypto Post
Do you ever imagine cavemen? Like the communities of cave men (and women), and how they governed their systems?
Jury of Cavemen: “Ok, consensus has been reached, we have decided to throw rocks at Adam until he eats the whole turkey.”
Adam: “Can I nominate that Nick or Janice throw the rocks?“
Jury of Cavemen: “No we all want to throw the rocks.”
Adam: “Can I pick the turkey?”
Jury of Cavemen: “Yes.”
They had it good.
Well, we have gone through what I would call, “scaling human governance,” problems, and now we have four billion people connected to the internet, and we expect them all to agree to the rules of the digital world AND their chosen (or unchosen) country. I think that this is where most of the debates of today stem from.
There is so much confusion around what is allowed with crypto and what is not, nationally, that it turns out you can build a company in the cracks between the countries, and I think this might be the way forward for many startups breaking new ground.
I should probably make a note here that says I don’t condone breaking any laws, but in the case of Binance, I don’t believe they broke any laws, they just skirted around jurisdictions creating an arbitrage that gave them frictionless building time, the time they needed to build without fear.
Binance is a company if you are in the crypto world, you have heard of, if you are not, you probably haven’t. They didn’t exist 24 months ago and now they are worth more than $1B. And if you hear just that, and nothing else, it sounds like a scam, but it’s not, this is new. This is something that has never been done before. This is something the world has never seen before and I believe should be encouraged.
Every time a new crypto startup pitches me they ask, “where should I register?” And before the rise of crypto, I always would push them toward a Delaware C-Corp, every time. But for Crypto, for anything, I’m not sure that will be the right answer in the future, and so now when I am asked, I hesitate. I wonder, if there is a better way. I wonder is there a way to do what Binance did? (I haven’t explained what Binance did yet, I know that)
The rules around crypto have become so opaque country to country, that there are no clear guidelines anywhere. Japan says it’s a currency, China shuts it down and then opens it up, and then shuts it down and then opens it up and then shuts it down again. Malta says “Welcome.” Singapore gives basic guidelines, and the US leaves everything open ended.
And in the US, the IRS wants to tax crypto like property, the SEC wants to tax it like a security, the CFTC wants it to be a commodity and I want it to be something more than all of those things. You know what happens when you aren’t clear on rules… humans happen. Humans find the opportunity and build. Humans are awesome.
Binance is run by a guy names CZ, Changpeng Zhao, he is an "OG” Bitcoiner. And for what he has done with Binance, I respect the hell out of him. He built a company outside the jurisdictions of anyone. When someone started to say that what he was doing wasn’t allowed, he jumped jurisdictions, while keeping the product online. Crypto allowed for this to happen, they launched a token, they built a product and they became one of the most dominant exchanges. And now that they have built a dominant brand with a high market cap, they have been welcomed by multiple countries!
This leads me to what is next.
Binance paved the way. They did something, they created an unstoppable organization. Binance is a hybrid of what was a corporation and what the future organizations look like. They jumped from jurisdiction to jurisdiction playing in the blind spots of the world. They took an unproven path and succeeded. I’m excited about what this means for the future of crypto. The built without the fear of regulation, merely jumped to the accepting jurisdictions.
I’m actively seeking companies finding jurisdictional arbitrage for their business.
The era of the corporation is fading. We are in hybrid times… and the future is global movements.
By Adam Draper
I ponder as a VC.
It's a quick one minute read to make you think, smile, or laugh.
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