From the story that the kings of Siam gave such animals as a gift to courtiers they disliked, in order to ruin the recipient by the great expense incurred in maintaining the animal.
Indeed, while the white elephant was a sacred animal, owning one would incur quite the fee, as you aren't allowed to put them to work (because sacred) and they eat hundreds of pounds of food a day. How's that for eating one out of house and home?
In the context of crypto and regulation I'm quite certain that we are going to see these kinds of "white elephant" airdrops get sent out as either a practical joke or a practical attack against those who think they can control these emergent communities.
The thing about regulators is that they want to control everything within their power. They want to tax it, they want to bend it to their will. Crypto is having none of that, and the nerds and revolutionaries programming out these protocols can run circles around the regulators. I guarantee it.
For example, imagine a token that's designed to rugpull everyone on purpose at the end of the year so they can declare all that money as a loss, only for that value to pop up somewhere else on January 1st. All the on-chain metrics would indicate that the rugpull occurred. For all intents and purposes, it happened. However the value wasn't actually lost, but it gets declared as a loss anyway due to the timeframes of how taxes are reported (Jan 1 to Dec 31). More on this in another post.
The real point of this post is the White Elephant airdrop. This is where a regulator or a judge or anyone in a position of power that opposes crypto officially gets airdropped "millions of dollars" of a fully illiquid token. It's very easy to make it look like a cryptocurrency has a market cap of trillions of dollars if it only has $1 worth of liquidity on the buy and sell order bids. It is in this way that anyone who opposes crypto (or just anyone in general) will be attacked with this flaw in the system.
The government will then have no other option but to create regulations that acknowledge that liquidity in markets is indeed a factor when calculating taxes. But this in turn becomes a very slippery slope, because where does one draw the line? Whereever the line is drawn exploiters will move in to exploit the rule new rule and dance around the edge-cases.
And these are just the things I come with off the top of my head.
Surely there are smarter and more creative people in crypto than I. There will be inventions that people had never even considered before that come in to throw a monkey-wrench into this completely broken legal system. Considering our loop-holed legal swiss cheese of a government, this will be incredibly easy to do as crypto infrastructure increases and becomes more accepted over time.
Conclusion
The regulators are in over their heads. Already congress has admitted to owning crypto. They don't own much, but imagine how that changes as the price goes up and mainstream adoption gets stronger. Remember that these people serve the richest master. If that master is crypto, we are going to be for a wild ride over the next ten years.