America’s crypto renaissance is already failing; but we can fix it

Opinion by: Shane Molidor, Founder, ForgdFor years, launching a crypto project in the United States has been a maze of uncertainty. Legal ambiguity and a hostile regulatory environment have driven founders offshore, turning places like Switzerland and the Cayman Islands into global hubs for blockchain innovation.With Trumps election, things finally started to change, with a US administration openly declaring its intention to be crypto-friendly. Yet, despite the rhetoric, nothing concrete has changed so far.Launching a crypto project in the US is just as difficult as ever. US regulatory agencies continue to offer nothing but vague threats and regulation by enforcement lawsuits. America wants to be a leader in crypto, but, even under the Trump administration, it isnt taking action to create the conditions that would make that happen.Killing crypto in AmericaEvery 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avoid regulatory scrutiny, but until a project launches its token, a degree of centralization is unavoidable.The SECs outdated Howey test ensures that nearly every legitimate crypto project gets classified as a security. The logic is self-defeating. Projects cant decentralize without launching a token, but launching a token in the US instantly puts them in the SECs crosshairs.This isnt just a theoretical issue; it has real consequences. Liquidity providers, essential for all new token launches, wont engage with US-based projects because they assume their tokens will be classified as securities. Centralized exchanges refuse to list tokens issued from US entities for the same reason. Even decentralized exchanges face pressure from their legal teams to avoid actively seeding liquidity for American projects. The result? US founders are boxed out of the global crypto economy before they even get started.Offshore jurisdictions are winningThis regulatory failure has spawned an entire cottage industry of offshore legal firms specializing in setting up token-issuing entities. With its FINMA no-action letter system, Switzerland has become a hotbed for crypto projects because it offers one of the few structured ways to get legal clarity on a tokens classification. The Cayman Islands and British Virgin Islands have also established themselves as crypto safe havens, providing flexible corporate structures that allow projects to operate with far less regulatory risk.Recent: US Treasury wants to cut off Huione over ties to crypto crimeThe 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, which serve non-profits operating independently of US-based development shops. American founders are forced to funnel money into unnecessary legal fees, overseas operators, and shell foundations to avoid the inevitable crackdown from US regulators. This isnt just bad for crypto; its bad for America. Until it can be solved, the US will continue to hemorrhage talent, investment, and influence to less myopic jurisdictions.Make America crypto-friendlyThe US has spent years fumbling crypto policy, and now, even with an administration that claims to be pro-crypto, its still failing to deliver real change. The solution isnt to promise capital gains tax exemptions on crypto, as some have suggested. That does little to ameliorate the punishing regulatory landscape US-based projects are forced to navigate. If the US truly wants to lead in crypto, it also must take the lead in providing regulatory clarity.That means finally recognizing that the same regulations that have governed traditional financial markets cant always be applied to crypto. The Howey test doesnt work. Instead, the government must provide a new and functional legal framework for the crypto industry.Its time for US legislators and regulators to acknowledge that crypto tokens cant achieve decentralization instantaneously and almost always require the efforts of a team of core contributors to bootstrap initial growth and development. The federal government must devise a version of the Howey test that does not automatically classify every new crypto token as a security but instead allows tokens a grace period to decentralize. In conjunction with this, the US must establish new protections to ensure insiders arent unduly benefiting from crypto projects while they scale.In addition to swiftly ending the regulation by enforcement approach employed under Gary Genslers SEC, a tactic seemingly designed to gradually smother crypto activity in the US, the government must provide clear guidelines. It needs to be feasible for market makers to evaluate whether US tokens are commodities or securities with a degree of stability and predictability. This is the only way to end the blanket bans market makers have placed on US tokens and bring crypto development back to America.Americas window of opportunity is closingCrypto founders arent waiting for Washington to figure it out. Every day, without clear regulations, more crypto projects are incorporated offshore. The US doesnt even need to embrace crypto. It just needs to stop actively driving it away.If this administration truly wants to make the US the leader in crypto, it needs to move beyond campaign slogans and start fixing the fundamental problems that forced this industry offshore in the first place. And it needs to act fast.Opinion by: Shane Molidor, Founder, Forgd. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.