Written by Romeo Kuok
Today’s crypto world is 1996 Hong Kong. Everyone knows this industry will be absorbed by regulation. Everyone sees the countdown. But each side’s playbook is completely different.
In 1996, the clock in Hong Kong was ticking loudly toward July 1, 1997. The handover of sovereignty from the British Crown to the People’s Republic of China was an impending event horizon that everyone acknowledged but no one fully understood. It was a frontier town living on borrowed time. The Hang Seng Index had just broken through the 12,000 mark for the first time, property prices were surging to world-record highs of over $700 a square foot for undeveloped land, and capital was pouring in from London, New York, and Tokyo. The tension was not in wondering whether the rules would change — it was in the realization that the rules were inevitably going to change, and every player at the table was preparing for a completely different outcome.
We are living in that exact moment in crypto today. The regulatory absorption is coming. Digital assets recently surpassed $4 trillion in total market value, with Bitcoin ETFs absorbing tens of billions of dollars in inflows and the stablecoin market crossing the $300 billion threshold. It is no longer a question of ‘if’ the state will assimilate this industry, but ‘when’ and ‘how’. The countdown has begun, but if you look closely at the participants in this market, you will realize they are all reading from entirely different playbooks.
The Conflicting Playbooks
To understand the friction in today’s market, you have to look at the diverging strategies of its major factions. Just as in 1996 Hong Kong — where some tycoons liquidated and fled to Vancouver, while others quietly bought up the harbor — the crypto ecosystem is fractured by competing visions of the future.
Take the centralized exchanges. Their playbook is one of aggressive compliance and quiet monopoly. They are acting like the legacy trading houses of 1990s Hong Kong — rushing to build moats, secure licenses, and integrate with the incoming regime before the doors close. Consider the historic $4.3 billion settlement Binance reached with the U.S. Department of Justice in late 2023, followed by a wave of dismissals in civil enforcement actions by 2025. This was not a defeat; it was the price of admission. The major exchanges — Binance, Coinbase, and a handful of others — now control over 80% of cumulative trading volume. They believe that when the dust settles and the frontier is closed, they will be the designated toll collectors for a newly sanitized industry.
The DeFi protocols, however, are reading from a completely different playbook. Their narrative is one of evasion, resilience, and ideological purity. They are the smugglers and the shadow economy, convinced that if they decentralize enough, they can survive the handover untouched. Total Value Locked (TVL) in DeFi has rebounded massively, pushing past $100 billion, with lending protocols alone holding over $50 billion. In the face of regulatory pressure, these protocols are separating their execution, settlement, and custody layers to gain compliance flexibility without abandoning their non-custodial ethos. They are writing their smart contracts to be immutable and ownerless, betting their survival on a simple premise: code will outlast jurisdiction.
Then there is institutional money. Wall Street has arrived with a playbook that assumes total assimilation. They view crypto not as a revolution, but as a new asset class to be packaged, securitized, and sold to the masses. The data here is staggering. Institutional crypto adoption increased by more than 300% between 2020 and 2024. U.S. spot Bitcoin ETFs alone accumulated over $100 billion in assets by 2025. Meanwhile, the tokenized Real-World Asset (RWA) market exploded from roughly $5 billion to over $24 billion, driven by giants like BlackRock and Franklin Templeton tokenizing U.S. Treasuries. To them, the handover is simply a change of management — an opportunity to buy the frontier at a discount and pave it over with familiar financial products.
Retail investors, meanwhile, are caught in the middle, playing a high-stakes game of musical chairs. Their playbook is driven by pure speculation, hoping to extract one last massive payout before the music stops and the adults take over the casino. They are the ones chasing meme coins and leveraging their portfolios, mirroring the retail property speculators in 1996 Hong Kong who flipped unbuilt apartments for double their value overnight.
And finally, the regulators. Their playbook is written in the language of control. They see themselves as the returning sovereign, intent on taming a wild province. But they are fragmented, slow, and often fundamentally misunderstand the technology they are trying to govern. They pursued a patchwork of enforcement actions against the industry throughout 2024 and 2025, but the sheer scale of the market — processing trillions in volume across APAC and North America — has forced them to pivot from eradication to integration.
Everyone knows this industry will be absorbed by regulation. Everyone sees the countdown. But each side’s playbook is completely different.
The Tension of the Countdown
This is where the true tension of the current market lies. It is not just the volatility of prices; it is the friction of these conflicting playbooks grinding against one another. Every lawsuit, every protocol upgrade, every institutional filing, and every multi-billion-dollar M&A deal is a maneuver in anticipation of the final curtain. Crypto M&A hit a record $8.6 billion in 2025, driven entirely by the need for regulatory compliance and consolidation.
In 1996 Hong Kong, the uncertainty was palpable. Some people fled, taking their capital to London or Toronto. Some people sold early, terrified of the incoming regime. And some people doubled down, building empires that still stand today. The ones who succeeded were those who understood that the transition itself was the opportunity. They didn’t just play their own playbook; they anticipated how everyone else’s playbook would fail or adapt.
The same dynamic is playing out in the stablecoin market today. Tether (USDT) and USDC collectively account for nearly 90% of the $300 billion stablecoin market. But beneath that dominance is a war of playbooks. USDC’s market capitalization grew by 73% in 2025, outpacing USDT’s 36% growth, largely because USDC positioned itself as the compliant, institution-friendly bridge to traditional finance. It is a perfect microcosm of the broader market: the compliant actors are quietly absorbing market share while the offshore giants rely on sheer momentum and first-mover advantage.
The Inevitable Absorption
The frontier will close. The wild, untamed energy of this era will eventually give way to a more structured, regulated reality. The crypto industry will be absorbed, just as Hong Kong was absorbed. The days of 100x returns on vaporware will vanish, replaced by basis-point yields on tokenized treasuries and highly regulated decentralized exchanges.
But we are not there yet. The countdown is still running. The final act of this handover has not yet been written, and the clash of these different playbooks will define who emerges as the architects of the next financial era, and who becomes a footnote in its history.
If you are operating in crypto today, you must ask yourself: which playbook are you reading from? Are you the centralized exchange building a moat? The DeFi protocol hiding in the code? The institutional giant buying up the infrastructure? Or the retail speculator hoping to get out in time?
More importantly, you must ask yourself what happens when your playbook collides with everyone else’s. Because like Hong Kong, 1997 is coming. The handover is inevitable. The only question left is who will own the harbor when the new flag is raised.
