Regulatory Arbitrage
The practice of a company structuring its operations or choosing its home jurisdiction specifically to benefit from a more favorable regulatory regime elsewhere.
Regulatory arbitrage refers to a company deliberately basing itself, or structuring a specific product, in the jurisdiction with the most favorable rules for that activity — rather than the jurisdiction where most of its actual users or business happens to be. It's a long-standing practice across the broader financial industry, not unique to crypto, but it's been especially visible in crypto given how unevenly regulation has developed across countries.
Several major exchanges have shifted their headquarters or primary operating entity between jurisdictions over the years as regulatory environments changed — this isn't automatically a red flag (many legitimate businesses do this for entirely ordinary reasons), but it's worth knowing about when you're trying to figure out which regulator, if any, actually has authority over a platform you're using.
Related terms
Money Transmitter License / Exchange Licensing
The general concept of the government authorization an exchange needs to legally move customer funds — the specific license required varies enormously by country.
Security Token vs. Utility Token
A security token represents an investment contract subject to securities law; a utility token grants access to a product or service.