2016–2018: The Era of Industry Self-Governance – ICO Mania and Compliance Exploration
From 2016 to 2018, the crypto industry underwent a critical transition from wild growth toward initial compliance. The Initial Coin Offering (ICO) model peaked in 2017, with thousands of projects emerging globally, but widespread fraud and unregistered securities offerings triggered regulatory attention. The industry attempted self-regulation through the SAFT (Simple Agreement for Future Tokens) framework, designed to position token sales as exempt securities offerings. However, because tokens upon delivery were still deemed securities, SAFT failed to resolve the fundamental contradiction.
Meanwhile, the 2017 DAO Report (SEC investigation into The DAO project) established for the first time that certain tokens are securities and must comply with federal securities laws. This report became a milestone for crypto compliance, forcing projects to conduct legal assessments. Additionally, the industry began forming self-regulatory organizations and exploring KYC/AML practices, but lacked unified standards, leaving a regulatory vacuum.
2019–2021: The Licensing Era – FATF Rules, Exchange Licenses, and Global Enforcement
In 2019, the Financial Action Task Force (FATF) issued the Travel Rule guidance, requiring virtual asset service providers (VASPs) to transmit customer information during transactions, marking the formal extension of international anti-money laundering standards to crypto. Multiple countries quickly enacted legislation: New York State introduced the BitLicense, Singapore's Payment Services Act included exchanges under licensing, Japan's Financial Services Agency implemented a registration system, and the EU's Fifth Anti-Money Laundering Directive required member states to regulate crypto platforms.
In 2020, BitMEX was criminally prosecuted by the U.S. Department of Justice for ignoring AML/CFT regulations and failing to register as a futures commission merchant. This event signaled the end of the 'no-license' offshore exchange model. Also that year, China issued its '924 Notice', comprehensively banning crypto trading and mining, triggering a massive industry exodus. By 2021, major global exchanges were applying for or had already obtained multiple licenses, making compliance the bottom line for survival. Part 1 ends here; Part 2 will focus on the legislative era post-2021.