Crypto Industry Under Scrutiny as “Code is Law” Philosophy Tested
The crypto industry is once again under the spotlight as prominent hacks and legal disputes raise questions about the “code is law” philosophy that underpins blockchain technology. Recently, reports highlighted vulnerabilities in decentralized systems. The Ethereum DAO, which initially raised $160 million as the first decentralized autonomous organization to gain traction, suffered a massive hack. Meanwhile, the attack on Indexed Finance, linked to Andean Medjedovic, has become a symbol of the code is law movement, mixed with an anarchist mindset that continues to stir debate across the crypto ecosystem. These incidents are far from isolated.
High-profile hacks, including more recent events like the Bybit breach in early 2025, have collectively caused billions in losses across the sector. Experts warn that these breaches remain a major hurdle for institutional adoption of blockchain and on-chain assets. While each hack is unique in execution and outcome, the broader crypto community agrees that foundational issues must be addressed before Layer 2, Layer 3, and Web3 applications can gain traction among mainstream users. The debate over “code is law” has intensified in light of these events. Proponents argue that blockchain’s underlying code is fully vetted and immutable, making deviations unnecessary.
However, analysis of recent hacks reveals the limitations of this approach. Human error, flawed deployment, and buggy updates have all exposed vulnerabilities. Industry leaders emphasize that the ability to reverse or correct transactions and seek recourse against malicious actors is crucial for broader adoption. For investors and institutions, the expectation of redress in cases of breaches is now a baseline requirement. Legal challenges are also testing the boundaries of this philosophy. The ongoing case against brothers Anton and James Peraire-Bueno, accused of executing a $25 million crypto theft, underscores the tension between decentralized systems and traditional legal frameworks.
The defense argues that the absence of a central authority on Ethereum exempts their actions from regulatory scrutiny, reflecting certain aspects of the code is law mindset. However, regulators and traditional finance observers see potential fraud differently. As the market grows, experts highlight that regulatory oversight, investor protections, and the ability to pursue compensation remain essential for fostering confidence among retail and institutional participants. While code as law has theoretical merit, the consensus is that it cannot yet serve as the foundation for mainstream blockchain adoption.
