Licensing race analysis: why some projects still chase lightest rules

Explore how crypto projects navigate regulatory licensing, why many target minimal compliance, and what this means for investors in 2025.

• Why the “lightest rules” approach persists despite tightening regulation.
• The impact on tokenized real‑world assets (RWA) and retail participation.

In 2025, the crypto landscape is marked by an accelerating race to secure regulatory licenses across jurisdictions. Yet, even as governments tighten their grip on digital asset activities, several projects continue to chase the lightest set of rules, prioritising speed and cost over full compliance. This phenomenon raises critical questions for retail investors: why do these ventures persist in a highly regulated environment, and what risks does this strategy entail?

The core issue lies at the intersection of tokenization innovation and regulatory uncertainty. Projects that tokenize real‑world assets (RWA) can offer fractional ownership, liquidity, and yield to a global audience, but they must also navigate securities laws, KYC/AML requirements, and cross‑border tax implications. When obtaining a robust license is prohibitively expensive or time‑consuming, some builders opt for lighter frameworks—such as “non‑securities” classifications, custodial arrangements, or jurisdictional arbitrage—to launch quickly.

For retail investors, understanding this licensing race is essential. A project’s regulatory posture directly influences its legal protection, asset custody, and exit routes. While a light‑touch approach can lower barriers to entry, it may also expose holders to higher counterparty risk, limited recourse in disputes, or sudden regulatory crackdowns.

This article dissects the drivers behind the lightest rules strategy, examines real‑world examples—including tokenized luxury real estate—and offers practical guidance for investors navigating a rapidly evolving compliance landscape.

Background: The Licensing Landscape and RWA Tokenization

The rise of tokenized real‑world assets (RWA) has shifted the crypto sector from speculative tokens to tangible, income‑generating instruments. By converting physical properties, commodities, or even art into on‑chain digital securities, platforms can unlock liquidity for traditionally illiquid markets.

However, this innovation collides with a patchwork of regulations. In the United States, the Securities and Exchange Commission (SEC) treats most tokenized assets as securities if they meet the Howey Test. The European Union’s Markets in Crypto‑Assets Regulation (MiCA), effective from 2024, introduces licensing requirements for issuers offering crypto‑assets that function as financial instruments.

In 2025, several jurisdictions have begun to grant specific licenses for “crypto‑asset service providers” (CASPs) or “digital asset custodians.” These licences require rigorous know‑your‑customer (KYC) procedures, cybersecurity safeguards, and ongoing regulatory reporting. The cost of compliance—both in capital and administrative overhead—is a significant barrier for early‑stage projects.

Consequently, many developers choose to operate under lighter regulatory regimes or rely on jurisdictional arbitrage. For example, launching from countries with minimal licensing requirements or classifying assets as “utility tokens” can reduce the immediate need for full securities registration.

How It Works: From Off‑Chain Asset to On‑Chain Token

The tokenization process typically follows these stages:

• Asset Identification & Due Diligence: A legal entity (often a special purpose vehicle or SPV) acquires the physical asset, ensuring clear title and compliance with local laws.
• Token Issuance: The SPV issues ERC‑20 tokens that represent fractional ownership. Each token is backed by a specific amount of the underlying asset.
• Custody & Smart Contracts: A trusted custodian holds the physical asset, while smart contracts automate dividend distribution, voting rights, and secondary market trades.
• Investor Onboarding: Investors purchase tokens via an exchange or direct sale. KYC/AML checks may be performed at this stage depending on the jurisdiction.
• Ongoing Governance: Token holders can vote on key decisions—such as renovations, refinancing, or sale—through a DAO‑light governance model that balances efficiency with community oversight.

The success of this model hinges on transparent reporting, reliable custodianship, and an active secondary market. Any breakdown in these elements can erode investor confidence and trigger regulatory scrutiny.

Market Impact & Use Cases

Tokenized RWA offers a spectrum of benefits for different market participants:

• Retail Investors: Fractional ownership lowers the entry barrier to high‑value assets like luxury real estate, providing passive income streams and diversification.
• Asset Managers: Tokenization allows rapid capital deployment and liquidity generation, improving portfolio turnover rates.
• DeFi Protocols: Wrapped RWA can serve as collateral for lending or yield farming, bridging the gap between traditional finance and decentralized ecosystems.

Below is a simplified comparison of the old off‑chain model versus the new on‑chain tokenized approach:

Risks, Regulation & Challenges

The lightest rules strategy amplifies several risks:

• Regulatory Uncertainty: Projects that sidestep full licensing may face sudden enforcement actions or forced delisting if regulators deem their classification incorrect.
• Smart Contract Vulnerabilities: Bugs can lead to loss of funds, misallocation of dividends, or manipulation of voting rights.
• Custodial Risk: If the custodian fails—through insolvency or theft—the underlying asset may be lost, impacting token holders’ value.
• Liquidity Constraints: Without a robust secondary market, tokens can become illiquid, making it difficult for investors to exit positions.
• KYC/AML Compliance Gaps: Light licensing may allow projects to omit rigorous identity checks, increasing exposure to money laundering or fraud risks.

Concrete examples include the 2023 collapse of a tokenized art platform that lacked proper custody arrangements, leading to the loss of several high‑value pieces. In another case, a property token issuer in a low‑regulation jurisdiction was abruptly shut down by the SEC for failing to register as a securities issuer.

Outlook & Scenarios for 2025+

The next 12–24 months will likely see three distinct trajectories:

• Bullish: Regulatory clarity materializes, licensing frameworks become standardized, and tokenized RWA gains mainstream adoption. Investors benefit from increased liquidity, diversified portfolios, and robust legal protections.
• Bearish: Global regulators clamp down on light‑touch projects, imposing retroactive fines or asset freezes. Many platforms are forced to shut down, eroding investor confidence and leading to market consolidation.
• Base Case: A gradual regulatory evolution with mixed compliance outcomes. Projects that have secured licenses thrive, while those operating under minimal rules face intermittent enforcement but survive in niche markets.

Retail investors should monitor licensing announcements, jurisdictional changes, and the development of secondary marketplaces as key indicators of project viability.

Eden RWA: A Concrete Example of Light‑Touch Licensing in Action

Eden RWA is an investment platform that democratizes access to French Caribbean luxury real estate—specifically properties in Saint-Barthélemy, Saint-Martin, Guadeloupe, and Martinique—through tokenization. By combining blockchain technology with tangible, yield-focused assets, Eden offers a fractional, fully digital, and transparent ownership model.

How it works:

• SPV Structure: Each villa is held by a dedicated SPV (SCI/SAS) that issues an ERC‑20 property token. Investors hold tokens that represent indirect shares in the SPV.
• Rental Income Distribution: Periodic rental income, paid in stablecoins (USDC), is automatically distributed to holders via smart contracts.
• Experiential Stays: Quarterly draws select a token holder for a free week in the villa they partially own, adding utility beyond passive income.
• DAO‑Light Governance: Token holders vote on key decisions such as renovations or sale, ensuring aligned interests while maintaining operational efficiency.
• Future Liquidity: A forthcoming compliant secondary market aims to provide liquidity for token holders.

Eden’s approach exemplifies the lightest rules strategy: it leverages existing real estate licensing frameworks in France and the Caribbean, uses an SPV to isolate legal risk, and operates largely outside the purview of securities regulators by focusing on yield‑generating income rather than speculative trading. This model lowers compliance costs while still offering investors access to high‑quality assets.

Interested readers can explore Eden RWA’s presale opportunity for more information:

Eden RWA Presale – Official Site

Join the Eden RWA Presale Now

Practical Takeaways for Investors

• Verify that a tokenized asset is backed by a legal SPV and reputable custodian.
• Assess the licensing status of the platform—projects without clear regulatory compliance may face future crackdowns.
• Check for an active secondary market; liquidity constraints can significantly affect exit options.
• Review smart contract audits and vulnerability history before investing.
• Understand KYC/AML procedures; lighter compliance regimes may increase counterparty risk.
• Monitor jurisdictional changes—regulations in the U.S., EU, or Caribbean can shift quickly.
• Consider the long‑term viability of the underlying asset class and its income potential.
• Keep abreast of platform governance structures; DAO‑light models require active participation to protect interests.

Mini FAQ

What does “chasing lightest rules” mean for a crypto project?

It refers to projects opting for minimal regulatory compliance, often by classifying tokens as utilities or operating in jurisdictions with lax licensing requirements. While this can reduce costs and speed up deployment, it may increase legal and operational risk.

How does tokenization improve liquidity for real‑world assets?

By dividing an asset into many transferable digital tokens, investors can buy or sell fractions at any time on a blockchain‑based market, bypassing the slow, illiquid processes of traditional real estate transactions.

What are the main regulatory risks for tokenized RWA?

Key risks include securities law classification, KYC/AML compliance failures, smart contract bugs, and custodian insolvency. Regulatory enforcement can lead to asset freezes or fines if a platform is deemed non‑compliant.

Is earning rental income from tokenized property safe?

Income distribution relies on audited smart contracts and reliable custodianship. While transparent, it still carries counterparty risk; investors should verify the platform’s audit history and insurance coverage where available.

Will a light‑touch license protect me if the platform is shut down?

No. A minimal compliance approach offers little legal recourse in case of regulatory action or operational failure. Investors with full licensing typically enjoy stronger protections under local securities law.

Conclusion

The licensing race analysis reveals a stark divide: while some projects secure robust regulatory frameworks to safeguard investors, others continue to chase the lightest rules for speed and cost efficiency. In 2025, this divergence shapes market dynamics, influences investor risk profiles, and determines the long‑term viability of tokenized real‑world assets.

For retail investors, understanding a platform’s licensing posture, custody arrangements, and governance model is as crucial as evaluating asset fundamentals. Projects like Eden RWA illustrate how light compliance can coexist with tangible value creation, but they also underscore the importance of due diligence in an evolving regulatory environment.

Disclaimer

This article is for informational purposes only and does not constitute investment, legal, or tax advice. Always do your own research before making financial decisions.