78 Applications: The AI Export Plan That Crypto Should Study
Larktoshi
The U.S. Commerce Department’s advanced AI export licensing program received exactly 78 applications. That’s it. Not hundreds, not thousands—78. When the rule was proposed in late 2023, the assumption was that every major AI lab and cloud provider would line up for permission to move model weights and inference APIs across borders. Instead, the industry sent a signal. And for anyone in blockchain who has watched the SEC’s regulation-by-enforcement play out over the last five years, that number should feel eerily familiar. Every token is a vote for a future we haven't seen. In this case, the vote was silence.
The program, administered by the Bureau of Industry and Security (BIS), was designed to control the export of “advanced AI models” to countries like China, Russia, and others deemed national security risks. It requires a license for transferring model weights, providing cloud-based API access, or engaging in cross-border training collaborations. But 78 applications is far below any reasonable expectation—given that hundreds of U.S.-based AI companies serve global customers. The data point alone doesn’t tell us why, but the market’s reaction does. During my time auditing the 0x protocol v2 contracts in 2018, I learned that when a regulatory or technical structure is ambiguous, rational actors will either find a way around it or withdraw entirely. The 78 applications point toward withdrawal.
The narrative mechanics here are instructive. Market sentiment among AI firms mirrors what we saw in DeFi during the 2022 enforcement spree: when the rules feel arbitrary or the cost of compliance exceeds the benefit of participation, the market doesn’t engage—it routes around. My analysis of 50,000 Discord messages during the Bored Ape Yacht Club mania taught me that emotional contagion drives adoption faster than regulation can contain it. The same psychological dynamic is at play. Companies see the application process as high-effort, low-certainty, and potentially exposing them to liability. So they don't apply. They either halt international services, restructure through offshore subsidiaries, or simply ignore the requirement, betting that enforcement is unlikely. The result is a policy that fails its own stated goal of preventing advanced AI from falling into adversarial hands.
From a structural integrity perspective—the core lens I use to evaluate any crypto protocol—the flaw is clear. The BIS rule lacks precise definitions. What constitutes an “advanced AI model”? A specific parameter count? A certain training compute threshold? A capability benchmark? The ambiguity forces applicants to guess, and guessing is expensive. In crypto, we see this same problem with token classification. The SEC refuses to define what makes a token a security, leaving projects to guess—and then punishing them retroactively. The consequence is the same: capital exits, innovation relocates, and the U.S. loses its competitive edge. The 78 applications are just the first public data point in what will likely become a longer pattern of non-cooperation.
Now here’s the contrarian angle: some might say 78 applications means the regulation is working—that only a few companies actually need a license because most AI models don’t meet the threshold. But that interpretation ignores the context. The BIS itself expected more. And if the threshold is so high that only a handful of applications are needed, then the regulation is either too narrow or too vague to matter. Worse, if firms are simply ignoring the requirement, the actual number of unlicensed exports is far higher, which means the control regime is a farce. That’s the same trap the SEC fell into with the Howey Test: it relied on a 1946 standard for a technology that didn’t exist, creating a regulatory vacuum where bad actors thrived.
For the crypto industry, this story is a canary. We are watching the U.S. government repeat the same mistakes it made with digital assets—imposing top-down rules that fail to account for the fluidity of global, permissionless networks. The AI export plan’s low uptake mirrors the low participation in the SEC’s crypto “safe harbor” proposals. Both signal a fundamental misalignment between how regulators think markets operate and how markets actually behave. Based on my experience advising three asset managers during the 2024 Bitcoin ETF narrative shift, I can tell you that institutional confidence depends on regulatory clarity. Without it, capital stays on the sidelines or flows offshore.
The lesson for crypto founders and investors is twofold. First, watch the BIS’s next move. If it tightens definitions and simplifies the application process, it might signal a willingness to learn. If it doubles down on enforcement, expect a wave of regulatory arbitrage—companies relocating to Singapore, Dubai, or Switzerland, just as crypto exchanges did after the 2023 enforcement blitz. Second, apply the same narrative framework to your own projects. When a regulatory proposal gets ignored by the very people it’s supposed to govern, that’s a market signal that the narrative is broken. Don’t wait for the fix—position in assets that thrive on regulatory dislocation.
Will the Commerce Department adjust? Or will it hold to the cognitive bias that more control is the answer to non-compliance? Every token is a vote for a future we haven't seen. The 78 applications are the first returns from that vote, and they suggest the electorate is staying home.