A high-profile venture by one of crypto’s most vocal thinkers has been ordered to shut down in Malaysia, only weeks after launching its physical campus. Johor state authorities revoked the business licence of Network School, founded by former Coinbase CTO Balaji Srinivasan, and directed it to cease all operations in Forest City effective July 22, according to the original report from Reuters. The decision punches a hole in Srinivasan’s offline ambitions, raising fresh questions about the regulatory fragility facing tech ventures that move from digital-only models into physical-world institutions.
A Sudden Shutdown in Forest City
Network School was pitched as an experimental learning environment tied to Srinivasan’s broader ideas around network states and online communities with real-world footprints. Forest City—a sprawling, often-criticized luxury development in Johor—seemed a logical playground for the experiment. Land was cheap, the Chinese-backed project had struggled for years to fill its towers, and the promise of a crypto-adjacent hub briefly attracted attention.
Now the school’s physical presence is being dismantled before it could gain traction. Johor’s Ministry of International Trade, Industry, Investment, and Utilities confirmed the licence cancellation, leaving little room for appeal. The order demands a complete halt to operations, effectively forcing Network School to vacate the premises on short notice. No official statement has been issued by Srinivasan or his team.
The Investigation and Its Geopolitical Overtones
The licence action followed a probe into allegations concerning the presence of Israeli participants at the school. That detail immediately turns a business licensing matter into a geopolitically loaded story. Malaysia has no formal diplomatic relations with Israel and maintains strict policies around Israeli visitors. Yet immigration authorities stated that the individuals inspected held valid travel documents, creating a disconnect between the allegations and the documented facts.
Whether the presence of Israelis triggered a sensitivity clause in the school’s licence or prompted a broader political reaction remains unclear. The ambiguity itself highlights the non-linear risks that crypto entrepreneurs face when they move from borderless code to physical jurisdictions with rigid sovereignty reflexes. Srinivasan’s profile as a well-known tech figure likely made the school an easier target for scrutiny than an anonymous business.
The incident lands at a moment when crypto-related projects are trying to establish legal permanence in various jurisdictions. While the United States wrestles with ongoing regulatory battles over landmark crypto legislation, smaller nations and special economic zones have been courting founders with friendlier licensing. Malaysia, with its digital economy push, has at times seemed part of that trend. The Network School episode complicates that narrative.
Broader Implications for Crypto-Adjacent Ventures
For the crypto industry, the story matters less for its direct market impact and more for what it signals about the limits of personality-driven, physical-world expansions. Srinivasan’s intellectual influence on topics like exit from legacy systems and building parallel institutions carries weight in certain circles. Yet a school licence proved far easier to revoke than a smart contract to freeze. That contrast may cool some founders’ enthusiasm for offline bases in jurisdictions with opaque enforcement mechanisms.
The broader sector, meanwhile, continues to advance through more traditional channels. Real-world asset tokenization has crossed $20 billion, and institutional players are settling on-chain directly with banks. Development activity also remains concentrated in familiar ecosystems, with weekly data showing Ethereum and BNB Chain still leading in developer commits. These indicators suggest that the infrastructure layer of crypto is navigating regulatory complexity resiliently, even as individual figurehead projects stumble.
What remains uncertain is whether Network School can regroup elsewhere. Srinivasan’s concept, if stripped of a specific location, could theoretically resurface in a more permissive jurisdiction. But the speed and opacity of the Malaysian action—where the immigration status of participants appeared to be the fuse, rather than the fire—may make future hosts more cautious. For now, the shutdown stands as a pointed reminder that even the most digital-native founders are subject to the brittle politics of the physical world.
