Variant Fund chief legal officer Jake Chervinsky maintains that decentralized public blockchains remain the regulatory standard for product development, despite recent announcements of corporate-controlled layer-1 (L1) networks.

Chervinsky argued on X that many new L1s built by companies for product-specific reasons are “unnecessary” and “unhelpful” from a regulatory perspective.

He noted that no US regulator has demanded permissioned validator sets or built-in compliance tools, and no serious legislative effort in Congress has contemplated such requirements.

Chervinsky added:

“If you have a great commercial reason to build (or build on) a product-specific L1, have at it. If not, and you’re just vaguely worried about compliance issues, decentralized public blockchains remain the standard.”

Circle recently announced its own L1 called Arceeee last month, followed by Stripe revealing Tempo, a payment-focused L1 network built in collaboration with Paradigm.

Corporate L1s as regulatory arbitrage

Venture capitalist Revaz Shmertz offered a contrasting view in response to Chervinsky’s remarks, arguing that corporate L1s represent a form of regulatory arbitrage.

Shmertz contended that regulatory agencies may act unilaterally through enforcement actions and guidance letters, regardless of congressional inaction.

He argued:

“Corporate L1s represent regulatory arbitrage, with companies building blockchain infrastructure that preemptively satisfies compliance requirements rather than fighting for protocol-level neutrality.”

Shmertz suggested this approach creates a “bifurcated adoption” where compliant c

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Author: Gino Matos