Amidst a backdrop of political change and hopeful rhetoric, the U.S. crypto industry finds itself at a crossroads. Despite the Trump administration’s proclaimed crypto-friendly stance, the reality on the ground suggests the American crypto renaissance is stalling. It’s a tale of regulatory quagmires and missed opportunities, and according to industry insiders, the situation is dire yet salvageable.
Regulatory Roadblocks
The United States, once a beacon of innovation, is losing its lustrous appeal to crypto entrepreneurs. The crux of the issue lies in the rigid regulatory frameworks that have not kept pace with the rapid evolution of digital assets. Industry analyst and founder of Forgd, Shane Molidor, explains, “Every crypto project faces the same fundamental problem: Achieving decentralization is critical to avoid regulatory scrutiny, but until a project launches its token, a degree of centralization is unavoidable.” It’s a catch-22 scenario where compliance seems almost impossible. As explored in our coverage of the SEC’s latest guidance, the need for simpler regulation is a sentiment echoed across the industry.
The Securities and Exchange Commission (SEC), with its reliance on the archaic Howey test, has classified most crypto tokens as securities—a move that experts argue stifles innovation. Liquidity providers and exchanges, wary of the SEC’s unpredictable enforcement tactics, shun U.S.-based crypto projects. As a result, American founders are left in a precarious position, unable to tap into the global crypto economy.
Offshore Exodus
This regulatory rigidity has driven a burgeoning cottage industry of offshore legal entities. Switzerland, with its FINMA no-action letters, along with the Cayman and British Virgin Islands, have become refuges for crypto projects seeking legal clarity and operational flexibility. Molidor notes, “The absurdity is that the actual work—the development, the hiring, the innovation—still happens in the US. The token issuance gets pushed offshore via ‘Associations’ and ‘Foundations.’”
The consequence? A drain of talent, capital, and influence from the U.S. crypto sector. American founders are forced to navigate a labyrinth of unnecessary legal fees and offshore operations to avoid regulatory crackdowns at home. It’s a lose-lose situation for both the innovators and the country.
A Call for Change
What needs to happen for the U.S. to reclaim its crypto leadership? According to Molidor, the answer is clear: regulatory clarity. The government must acknowledge that traditional financial regulations are ill-suited for the crypto domain. A revamped legal framework is necessary—one that provides a grace period for tokens to achieve decentralization without being prematurely classified as securities. This aligns with the calls from US crypto groups urging the SEC for clarity on staking, highlighting the broader demand for transparency.
Furthermore, Molidor suggests that ending the SEC’s “regulation by enforcement” approach is crucial. Market stability and predictability should be the norm, not the exception. A workable system where market makers can confidently assess the nature of U.S. tokens is essential for fostering a vibrant crypto ecosystem.
The Clock is Ticking
Time is of the essence. With each day of regulatory uncertainty, more crypto projects find solace offshore. The U.S. doesn’t have to fully embrace crypto; it just needs to stop pushing it away. If the current administration is serious about positioning the U.S. as a crypto leader, it must move beyond campaign slogans and address the fundamental issues that have driven the industry offshore.
The future of America’s crypto industry hangs in the balance. The choices made today will determine whether the U.S. regains its status as a hub of innovation or continues to watch its brightest minds and groundbreaking projects flourish elsewhere.
Source
This article is based on: America’s crypto renaissance is already failing; but we can fix it
Further Reading
Deepen your understanding with these related articles:
- U.S. Congress Braces for Intense Debate Over Crypto Legislation This Summer (openai)
- Crypto Coalition Tells SEC Staking Is ‘Essential Good,’ Not a Security
- UK’s FCA Seeks Public and Industry Views on Crypto Regulation
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
