America’s Crypto Renaissance Is Faltering — But It’s Not Too Late to Fix It

For more than a decade, launching a cryptocurrency project in the United States has been a bureaucratic labyrinth filled with uncertainty, outdated laws, and inconsistent enforcement. While American developers have led much of the global blockchain innovation, the regulatory infrastructure that supports them remains not only unclear but often hostile.

The 2024 U.S. election brought renewed hope for crypto advocates. With the return of a more openly crypto-aligned administration under Donald Trump, the industry anticipated a shift away from the regulatory hostility that defined the previous years. However, while rhetoric around supporting blockchain innovation has changed, the underlying policy failures persist.

Crypto entrepreneurs, investors, and developers are still facing the same core issues they did five years ago — legal ambiguity, unclear token classifications, and an ongoing threat of regulatory enforcement from agencies like the Securities and Exchange Commission (SEC).

Regulatory Deadlock Is Pushing American Innovation Offshore

At the heart of the U.S. crypto dilemma is the Howey Test, an 80-year-old legal framework originally designed to determine whether certain transactions qualify as "investment contracts." The SEC has consistently used this test to classify almost all crypto tokens as securities, making it nearly impossible for startups to navigate the early stages of a token launch without legal peril.

The irony is painful: U.S. regulators insist tokens must be decentralized to avoid being deemed securities — but a token cannot be decentralized at launch without a coordinated effort by a central team. Thus, every new project becomes an enforcement target before it can reach the very decentralization the SEC demands.

This environment has made it all but impossible for American crypto founders to build at home. Liquidity providers refuse to engage with U.S.-based tokens due to the legal risks. Centralized exchanges won’t list them, and even decentralized exchanges are steering clear of seeding liquidity for U.S. projects. Without this early support, token launches flounder before they begin, and American founders are systematically excluded from participating in the global crypto economy.

Other Jurisdictions Are Taking the Lead

As the U.S. delays, countries like Switzerland, Singapore, and the Cayman Islands are racing ahead. Switzerland’s FINMA no-action letter system has emerged as one of the world’s most reliable paths for crypto legal clarity, offering startups a straightforward process to determine whether their tokens fall under securities laws.

In parallel, the Cayman Islands and the British Virgin Islands have created crypto-friendly corporate frameworks that offer flexibility and legal protection — without the threat of surprise enforcement actions. As a result, an entire cottage industry has emerged to help American founders relocate their token issuance offshore.

And yet, the development work — coding, hiring, research — often remains in the U.S. What leaves the country is legal jurisdiction, capital, and influence, siphoned away to more agile regulators abroad. This process is costly, inefficient, and deeply harmful to America’s long-term economic and technological interests.

The Status Quo Is Unsustainable

What’s more, the U.S. government has misdiagnosed the problem. Some have proposed capital gains tax exemptions for crypto, imagining this will reinvigorate innovation. But tax cuts can’t solve a broken foundation. What’s needed is clear, functional regulatory guidance.

First and foremost, the Howey Test must be updated or replaced when applied to digital assets. U.S. regulators must recognize that decentralization is a process — not a starting condition — and that crypto tokens require a legally protected grace period during which teams can build toward decentralization without the threat of prosecution.

This should be accompanied by measures to protect investors, such as mandated transparency from development teams and governance restrictions on insider token holdings. Striking the balance between innovation and accountability is not only possible, it’s imperative.

The SEC must end its “regulation by enforcement” strategy, a tactic that has punished good-faith actors and pushed legitimate businesses abroad. Market makers need clear criteria for whether a token qualifies as a security or a commodity — criteria that can be applied predictably and consistently.

The U.S. Still Has a Chance — But Time Is Running Out

Every day, American crypto founders incorporate overseas, taking with them not just intellectual property but economic opportunity and global relevance. For the U.S. to reclaim its position at the forefront of this industry, it doesn’t need to create crypto havens or subsidies. It simply needs to stop creating obstacles.

If the current administration is serious about fostering a “crypto renaissance,” it must act with urgency. It must move beyond campaign slogans and deliver structural reform — the kind that makes it feasible to launch a project, list a token, and operate within the law, without spending millions on legal gymnastics or facing the constant specter of a federal lawsuit.

The United States doesn’t need to embrace crypto with blind enthusiasm. But it does need to modernize its approach before it loses its talent, its capital, and its future to more forward-thinking countries.