Key Highlights
- Johor has ordered NSO Malaysia Sdn. Bhd. (Network School) to cease operations in Forest City from July 22, 2026.
- Authorities revoked one business license and ordered another unlicensed premise to stop operating immediately.
- The state government urged police, immigration authorities, and security agencies to investigate possible passport misuse, identity misrepresentation, and immigration violations.
Malaysia’s Johor state government has ordered enforcement action against Network School, the Web3-focused education and digital nomad community founded by former Coinbase Chief Technology Officer Balaji Srinivasan, after local authorities found multiple licensing violations at its Forest City campus.
The order, announced by Johor Chief Minister Onn Hafiz Ghazi in a statement shared on X, supports a decision by the Iskandar Puteri City Council (MBIP) to revoke one business licence, order another premises to stop operating immediately and require all affected activities to cease beginning July 22, 2026.
However, Srinivasan has rejected reports suggesting that Network School is being shut down, arguing that the dispute involves licensing paperwork rather than the closure of the project itself.
Johor says Network School violated licensing rules
According to Johor authorities, inspections conducted throughout July found multiple violations involving two premises operated by NSO Malaysia Sdn. Bhd. Officials said one location was operating without a valid business licence, prompting an order to cease business activities.
A second premises reportedly conducted activities different from those approved under its licence, leading MBIP to cancel both its business and advertising licences. Authorities also said advertising displayed at the site differed from what had originally been approved under local regulations.
MBIP warned that prosecution could follow if the company continues operating after the enforcement order takes effect.
Johor seeks wider federal investigation
Beyond licensing issues, Johor has requested several federal agencies, including the Ministry of Home Affairs (KDN), Immigration Department (JIM), Royal Malaysia Police (PDRM), and other security agencies, to investigate possible misuse of second passports, identity misrepresentation, immigration violations and other offences under Malaysian law.
The state said the matter deserves particular attention because Johor borders Singapore and serves as one of Malaysia’s most important international gateways.
In his statement on X, Onn Hafiz emphasized that foreign investment remains welcome, but not at the expense of legal compliance. He added that authorities would not compromise on violations that could affect public safety, national sovereignty or Malaysia’s legal framework.
Johor also called on Malaysia’s Ministry of Digital and the Malaysia Digital Economy Corporation (MDEC) to review any Malaysia Digital status or official recognition previously granted to Network School if regulatory breaches are confirmed.
Balaji says Network School is “not shutting down”
Hours after Johor’s announcement, Srinivasan disputed reports describing the situation as a shutdown. In a post on X on July 17, he wrote, “Network School is not shutting down; that’s fake news.”
According to Srinivasan, the company received two notices. The first, he said, simply requires the project to update wording on one of its signs. The second concerns a coworking space created by combining two adjacent units, where one unit reportedly has a valid licence while the adjoining unit does not. His response suggests the project intends to resolve the licensing issues rather than suspend operations.
Why Network School matters to crypto
Unlike a traditional educational institution, Network School has become one of the crypto industry’s most closely watched real-world experiments. Srinivasan, best known as the former CTO of Coinbase and former general partner at Andreessen Horowitz (a16z), created Network School as a physical community inspired by ideas outlined in his book The Network State.
The concept proposes that internet-native communities can use blockchain technology, cryptocurrencies, and online coordination to organize globally, pool capital, purchase physical territory, and eventually evolve into self-governing jurisdictions.
Forest City has served as one of the flagship locations for testing that vision, attracting founders, developers, investors, and digital nomads from across the Web3 ecosystem.
Crypto communities face growing regulatory scrutiny
The dispute highlights the increasing regulatory attention governments are paying to crypto-linked organizations operating across borders.
While Johor maintains that its actions are based on licensing compliance rather than blockchain-related activities, the case illustrates how Web3 communities experimenting with new models of living and governance remain subject to traditional business, immigration and local government regulations.
For now, Malaysian authorities appear determined to proceed with enforcement, while Srinivasan insists Network School will continue operating after addressing the administrative issues.
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