The Cloud Has a Border
A crypto community went to Malaysia to build the society of the future. Then the immigration officers arrived.
There are few things more reliably physical than a passport officer asking you to produce your documents.
This may come as disappointing news to the people building the Network State, a proposed successor to the old-fashioned nation state in which online communities become physical communities, acquire territory and eventually seek political recognition. The internet was supposed to dissolve geography. At the Network School in Malaysia, geography recently requested to see everyone’s passport.
The Network School is a residential community founded in 2024 by Balaji Srinivasan, the investor, author and former Coinbase chief technology officer. Its website calls it a “startup society” for remote workers, technology founders and content creators. For $1,500 a month, members are offered accommodation, meals, Wi-Fi, coworking space, fitness facilities and proximity to other people who use the word “community” with the confidence usually reserved for quarterly earnings.
It is based in Forest City, the enormous Malaysian property development built on reclaimed land across the water from Singapore. Forest City was conceived as a $100 billion eco-metropolis for hundreds of thousands of residents. Instead, its empty towers and remarkably available apartments earned it the less promotional description of “ghost city”. Where conventional urbanism failed to produce a population, crypto-utopianism volunteered to provide one.
For a while, this appeared almost poetic. A city without citizens met a movement looking for somewhere to manufacture them.
Then, in July, social-media posts alleged that Israeli citizens were participating in the Network School and had entered Malaysia using passports issued by other countries. Malaysia has no diplomatic relations with Israel and generally bars travellers using Israeli passports. The country’s Home Affairs Ministry opened an investigation into the identities, nationalities, travel documents and immigration status of the people living at the school.
The first headlines were irresistible. A secretive technology commune, crypto money, alleged Israelis, a Muslim-majority country, a ghost city and a founder who has written a book about replacing nation states: modern journalism rarely receives all its keywords in one parcel.
There was only one inconvenience. The allegations were not confirmed.
Malaysia’s Immigration Department inspected 266 foreigners from 40 countries and reported that they possessed valid travel documents. The department said further checks would continue, but its director-general subsequently stated that no evidence had yet been found to substantiate the claim that Israeli nationals were present.
The original formulation — that the community had “illegally hosted Israelis” — therefore jumped several floors without using the stairs. It converted an online allegation into a population, the population into an immigration offence and the investigation into something resembling a verdict.
The legal question is less dramatic and more interesting. Malaysia restricts the entry of holders of Israeli passports. According to Reuters, however, it has no specific law prohibiting an Israeli dual national from travelling on the passport of another country. Nationality and travel documentation are related, but they are not interchangeable, however convenient the distinction may be for headline writers, governments or people with two passports.
None of this means the investigation was imaginary. Authorities were also examining whether participants had the correct immigration passes, whether their declared reason for entering the country matched their activities and whether the operation complied with Malaysian rules. A valid passport proves that a document is valid. It does not automatically answer every question about visas, work, business licensing or the permitted use of a building.
But it does mean that, at the time of writing, the strongest version of the story is unsupported.
Srinivasan responded by placing future investment in Malaysia on hold and asking whether the country genuinely wished to become a global technology hub. He said the officials had acted professionally, while arguing that the investigation itself had become a punishment produced by anonymous online accusations.
He has a point, although perhaps not quite the point he intended.
Governments seeking foreign entrepreneurs cannot advertise regulatory openness and then allow online rumours to become instant national-security theatre. Legal predictability matters, especially when a country is trying to attract technology companies, investors and international talent.
Yet startup societies cannot demand the advantages of operating inside an established country while treating its politics, laws and historical conflicts as irritating legacy software. Forest City may look empty enough to inspire fantasies of a blank sheet. It is still in Johor. It remains subject to Malaysian immigration law, Malaysian institutions and Malaysian public opinion.
This is the recurring contradiction of digital nomadism once it becomes ambitious. At the individual level, it promises the freedom to work from anywhere. At the corporate level, it searches for cheaper property, favourable taxes, flexible visas and governments eager for investment. At the ideological level, it occasionally begins to imagine that mobility has made sovereignty obsolete.
But the lifestyle depends almost entirely upon sovereignty: one government issues the passport, another grants entry, another supplies legal protection, and several more maintain the banking, aviation and telecommunications systems that make the supposedly borderless existence possible.
The cloud has always had a border. It was simply hidden behind a pleasant interface.
The Network School episode may end with no immigration violations at all. It may uncover administrative problems unrelated to the nationality controversy. The investigation is not complete, and neither innocence nor wrongdoing should be manufactured in advance.
For now, the incident offers a less sensational but more useful lesson. You can create an internet community, give it accommodation, a gym, cryptocurrency and a theory of history. You can even place it inside an unfinished city and call it the prototype of a new civilisation.
But until your new civilisation has its own immigration desk, it is still a guest in somebody else’s country.
And the host has just asked to see its passport.