Onshore Optimism, Offshore Reality: Why Token Projects Still Aren’t Launching in the U.S.

By: Moish E. Peltz, Esq. and Kyle M. Lawrence, Esq.

After years of lobbying for clearer crypto policy, the U.S. industry finally got what it asked for — or at least, the beginnings of it. Between the passage of the GENIUS Act, the CFTC’s push to define its spot-market authority, and new SEC leadership signaling a more pragmatic approach, Washington has started to turn the corner. As a result, the political rhetoric around “onshoring innovation” has never been louder.

But for founders actually launching token projects, the view from the trenches looks very different. Despite there being a nominally more friendly regulatory environment, many new tokens are still being structured offshore, typically through foundations in the Cayman Islands, Switzerland, or Singapore. 

The reasons aren’t ideological, but rather practical. As Neil Thakur of Technos Associates put it on Episode 44 of Block & Order, “It’s almost like the Cayman or offshoring is the conservative way to go.”

So, why is that still true in our new political environment? And when, if ever, will “onshoring” become the default instead of the exception?

The Practical Reality: The U.S. Is Still a Tax Maze

Generally speaking, the optimism in Washington is justified. The GENIUS Act, the federal framework for stablecoins, was proof the U.S. can regulate crypto without crushing it. Together with bipartisan interest in digital asset market structure reform, Congress has been signaling that Washington was finally willing to treat crypto as a permanent part of the financial system, rather than just a speculative threat to it. 

Yet for now, the entrepreneurs building those projects still tend to set up shop elsewhere. As Block & Order co-host Moish Peltz pointed out in the same episode, it’s not legislation that’s holding onshoring back — it’s tax policy. “You can solve for a lot of the regulatory pieces with a change in administration and a more friendly environment in the U.S. for entrepreneurship, but you still can’t get past Treasury. And that’s what makes it difficult,” he explained. 

The U.S. tax code still treats tokens like a mix between property, currency, and intangible IP, and the lack of clarity creates major friction. Issuers that create or distribute tokens face unclear rules around income recognition, vesting, and transfer pricing. Transferring IP from a U.S. development company to a foundation, despite being something nearly every project does, can trigger a massive tax consequences.

By contrast, jurisdictions like Cayman, Switzerland, or Singapore offer a cleaner playbook. They have clearer rules for token issuance, minimal tax on IP transfers, and well-established foundation structures that support DAO-style or ownerless governance. “We know it hangs by a certain concept of justification. You need to know the value of something, whether you’re transferring property, or something else,” Thakur explained. The questions to ask are, “do you know what you’re dealing with there? Do you know how to justify it? With the Cayman guys, or the guys in Switzerland, we know how to operate.” 

Signs of Improvement in the U.S.

Congress has shown interest in clarifying crypto tax policy, as has the IRS. Both the House and Senate have had hearings on tax policy in recent months, while Wyoming Senator Lummis introduced a discussion draft in July and Ohio Representative Max Miller is working on crypto tax legislation as well. 

“I can say that in the conversations I’ve had here in the States with certain regulatory bodies or people close to [politics], there’s an emphasis to have things here,” Thakur said. “The regulatory winds are pushing back to the States and making it safe for us to operate here, so that the concept of offshoring may not be necessary.” 

Some individual states are also testing alternatives. Wyoming’s Decentralized Unincorporated Association (DUNA) structure has quietly gained traction among projects determined to operate stateside. It combines the limited liability of being an business organization recognized by the State of Wyoming, while centralizing the tax liability at the organizational level (like a Delaware C-corp), all while natively allowing for on-chain governance, allowing a project to issue and manage tokens within a compliant, auditable framework.

The appeal is obvious. A DUNA-based project can market itself as organized and regulated in the U.S., access the U.S. financial system, and (in theory) avoid the legal gray zone that still surrounds offshore DAOs. But the downsides are equally clear. A DUNA issuer faces complex reporting requirements, potential SEC oversight depending on token design, and U.S. tax and accounting burdens. 

In short, for many projects, a DUNA may not be enough. U.S.-based tokens remain constrained by investor appetite: global venture funds and liquidity providers often prefer dealing with Cayman foundations or Swiss associations because they are familiar, predictable, and recognized under existing fund structures. Until the U.S. Department of Treasury modernizes its approach, particularly around tax liability for token creation, vesting, and cross-border IP transfers, many builders will continue to view offshore setups as the path of least resistance.

Foreign Regulations Can Still Be Strong

One of the more counterintuitive truths of crypto law is that offshore doesn’t mean unregulated. Cayman, Swiss, and Singaporean structures have spent years adapting to global AML, securities, and tax reporting standards. Cayman in particular has clear legislation for virtual asset service providers and foundations, offering legal personhood and compliance options that often feel more defined than what’s available in the U.S..

For many founders, the calculus isn’t about evading oversight, but about avoiding regulatory grey areas, especially while the United States is still in early stages of establishing regulatory clarity. In the U.S., for example, a project might steer clear of SEC issues but still fall afoul of tax rules. In some offshore jurisdictions, those contradictions are minimized, because settling on crypto-friendly regulatory structures has been treated as a higher priority.

Further, there is increasing collaboration between US regulators and those in foreign jurisdictions, so switching from an offshore to onshore entity may become easier in the future. The GENIUS Act, for example, allows offshore issuers to operate in the United States so long as they operate in a jurisdiction the Treasury has decided has adequately stringent safeguards in place. Other offshore token issuers and now considering onshoring to the U.S. Members of Congress who are workshopping market structure legislation have also met with foreign regulators to seek inspiration and advice. 

A Legal Balancing Act

So is it better to launch onshore or offshore? The answer depends on a project’s stage, audience, and risk tolerance.

For certain projects, like those building enterprise blockchain tools, stablecoin infrastructure, or regulated payment rails, staying domestic offers strategic benefits. A U.S.-based issuer can more easily build direct partnerships with banks and fintech providers, qualify for federal regulation (for example under the GENIUS Act), and interact openly with domestic regulators, for example. 

On the other hand, early-stage token projects that rely on community governance or global liquidity pools may still benefit from tried-and-true offshore setups. 

The trade-off isn’t about ideology but sequencing. Offshore might make sense first, U.S. later. Over time, as the U.S. implements the GENIUS Act and Treasury modernizes its tax rules, that sequence may flip. But until then, the pragmatic choice for many builders remains what it’s been for years: launch offshore, grow global, and come home only once the rulebook catches up. “In the short to medium term, we can expect the offshoring to continue,” Thakur said. 

If your company is weighing where to form a crypto foundation or issue a token, Falcon Rappaport & Berkman can help. Our team can help you evaluate your regulatory and tax exposure, build a compliant roadmap, and choose the jurisdiction that fits your strategy.

Contact us to discuss how to structure your token project for growth — wherever it launches.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.