Regulate First, Define Later: The Dangerous Hypocrisy at the Heart of Global Crypto Enforcement -By Fransiscus Nanga Roka

Crypto protectionism mockingly donned the cloak of eliminating fraud, and now even that ruse is starting to wear thin. It is about regulatory opportunism. But across the globe, authorities are punishing and threatening actors in a market that they continue to be unable or unwilling to define. The article examines whether crypto is a commodity, security, currency or something entirely different. Regulators do not agree. Legislatures have not settled it. Courts remain divided. But enforcement has continued to move forward as though the law was already unambiguous.

That is not prudence. That is hypocrisy. But a system loses its moral credibility when it expects people to obey categories that the system itself has not clearly demarcated. In any serious rule-of-law order, definition precedes punishment. Before we can test what might be a violation of the law, with any reasonable certainty, citizens and businesses have a right to know what exactly is against the law. This is not a technicality. It is the basis of legality itself. However, many practising regulators see the crypto arena differently: continue to dictate first and define second and let fear do what legislation has not been able to.

This inversion is dangerous. It turns regulation from a public good of legal certainty into a political tool of institutional convenience. Lacking a clear mandate from law, agencies vie for aggressive interpretation. Rather than expecting elected bodies to weave together a coherent structure, they layer old doctrines over new technologies and name the patchwork accountability. What you get is not clarity, but coercion. Not order, but selective intimidation.

The basic scandal is not merely that crypto can be volatile and betrayed. Many markets are. The scandal here is that states desire the legitimacy of legality without engaging in grey legal-defining work. They seek obedience without guidance and innovation with only the most minor autonomy, punishment that never has to be collectively negotiated first. It’s a monumental failure of governance.

This failure is also global. Different jurisdictions may treat some tokens as commodities. Another sees them as securities. A third one defines them as a payment system. A fourth ebbs and flows with politics, judicial rulings or bureaucratic turf fights. The outcome is a fragmented global market in which the same asset might be legal under one regime, dubious under another and actionable in a third. But such fragmentation does not protect the Public. It produces uncertainty and then criminalizes those working in it.

Defenders of heavy-handed crypto enforcement tend to trot out the same old refrains: consumers must be protected, fraud punished and markets policed. All true. Those guiding principles, however, do not justify regulatory incoherence. Fraud is not fraud because it confuses governments; Fraud should be punished as common law gvmt. The world should be treated as a system of theft, and not because agencies want to retroactively apply twentieth-century labels to twenty-first-century systems. If the state cannot tell effects of fraud enforcement from that confusion, it stops regulating in good faith.

The ambiguity is worse than accidental. Some regulators find it useful. Ambiguity expands discretion. It allows for fly by night threats, negotiated compliance, grandstanding and headline grabbing prosecutions. You can manipulate a vague market much more easily than you could with legislation that is clear. Uncertainty becomes leverage. Viewed this way, crypto enforcement looks more and more like a strategy of governance through instability: keep the rules vague, then hit anyone who has neither political protection nor institutional support.

This is not just bad policy. It is corrosive constitutional culture. It sends a very dangerous message: that if legislatures are slow, divided or unwilling to pass new laws adapted for the modern era, they can be replaced by brute force instead of precision. That logic is going to get normalized in crypto eventually and it will not stay there. The precedent will travel. That same model of regulatory improvisation pretending to be the provision of legal certainty could apply in other nascent sectors AI, digital identity, tokenized finance, decentralized infrastructure.

Crypto does need regulation. But real regulation requires some intellectual honesty. To the extent governments believe digital assets are indeed securities, they should be clear and codify that position. If this means they are commodities, then legislate for them. If they are sui generis, establish a new category with clear delineation of rights, obligations and restrictions. They must not pretend that any legal uncertainty is permissible with other continued forms of legal aggression.

At the core of global crypto enforcement issues is not that law trails technology. That has happened before. More troubling still, is that the resources used to bridge this gap are now leveraged by institutions who instead opt for punishment not principles. And when power starts to punish what it still cannot define, the mark isn’t just crypto. It is the rule of law itself.

Fransiscus Nanga Roka

Faculty of Law Unversity 17 August 1945 Surabaya Indonesia