When Everyone Trades: How Regulatory Ambiguity Fuels Homogenous Business Models in Crypto

The crypto industry faces a paradox in 2026. Despite Bitcoin’s remarkable momentum and surging institutional capital, the entrepreneurial ecosystem shows signs of strategic convergence rather than diversification. A16z crypto leadership, including general partner Arianna Simpson, recently identified a troubling pattern: the rush toward trading services is homogenizing the competitive landscape, potentially stifling the innovation that should drive sector maturation.

The Trading Trap: Why Success Breeds Sameness

Virtually every crypto venture that has achieved scale—outside of core infrastructure plays and stablecoin issuers—now operates or plans to operate trading functionality. This isn’t accidental. Simpson compares the phenomenon to a behavioral economics problem: founders face immediate market pressure to monetize through trading, making it an irresistible short-term strategy despite long-term consequences.

The outcome is predictable. In a market where the majority of players pursue identical revenue streams, only a handful of dominant platforms can sustain profitable trading operations. Competition collapses into concentration. Simpson’s guidance to builders is unambiguous: treat trading as a revenue channel, not your destination. Companies that can resist the temptation to optimize around trading commissions may find themselves building more defensible, valuable enterprises over time.

This homogenous approach to monetization represents a significant departure from healthy market dynamics. Rather than founders competing on differentiated products and services, the industry has largely settled on a single playbook—one that extracts value from transaction fees rather than building sustainable business models around network effects or technological moats.

Regulatory Uncertainty: The Real Culprit

Miles Jennings, a policy architect at a16z crypto, has diagnosed the root cause of this strategic homogenization. Over the past decade, legal uncertainty in the United States has pushed founders into a risk-mitigation mindset rather than a product-building mindset. The country’s securities regulatory framework, never designed for decentralized networks, has been applied inconsistently to crypto projects.

The consequences are systemic distortions:

• Product strategy subordinated to compliance concerns: Engineers defer to legal teams rather than shipping features
• Token design compromised: Assets are engineered to avoid regulatory classifications rather than to serve economic functions
• Governance structures rendered performative: Decentralization becomes theater rather than substance
• Transparency discouraged: Founders adopt opacity as a defensive measure
• Business models sacrifice scalability: Revenue strategies prioritize regulatory avoidance over sustainable growth

Perversely, projects that ignored these regulatory pressures often outperformed those building with transparent, good-faith compliance. This inverted incentive structure has created a market where cutting corners and regulatory arbitrage become competitive advantages.

Institutional Adoption Hinges on Clarity

Goldman Sachs recently surveyed institutional investors on crypto adoption barriers and catalysts. Their findings validate the policy concerns raised by a16z executives: 35% of institutions cite regulatory uncertainty as the primary obstacle to deployment, while 32% identify regulatory clarity as the single most important catalyst for increasing institutional capital flows.

This data suggests that regulatory framework reform would benefit not only builders but also capital allocators. With clear compliance standards applied uniformly across the industry, good-faith projects would gain competitive parity. Infrastructure-focused firms, in particular, could capitalize on ecosystem growth without constant exposure to trading cycle volatility.

The Path Forward: Differentiation Through Clarity

The irony is striking. In seeking to avoid regulatory risk through homogenous business models centered on trading, the industry may be constraining its own growth potential. Institutional adoption—often cited as the next major industry catalyst—requires the opposite: transparency, sustainable business models, and technological differentiation.

When regulatory clarity finally materializes, founders will face a different incentive structure. Those who have built differentiated products, sustainable business models, and genuine network effects will have significant advantages. The homogenous trading platform competition will likely consolidate further, leaving room for specialized, focused players to capture market segments.

For now, the tension persists. Bitcoin’s institutional appeal and growing adoption provide momentum, yet the underlying entrepreneurial landscape remains stuck in a regulatory holding pattern that incentivizes short-term revenue optimization over long-term value creation. Breaking free from this trap requires not just founder discipline, but the regulatory clarity that remains the industry’s most pressing need in 2026.