If you’re building something in the crypto space and eyeing the U.S. market, one question tends to come up fast: Do I need a U.S. entity for my business?
For many founders, it’s not an easy call.
On one hand, having a U.S. entity could make it easier to access investors, gain credibility with partners, and capitalize on the massive potential of the U.S. user base.
But there’s also a complex set of changing legal and regulatory dynamics to navigate. While the Trump administration has signaled a more crypto-friendly landscape, businesses must also consider the long-term implications of current regulations and practices.
So let’s outline some key factors to think through before forming a U.S. entity, including recent policy shifts, potential regulatory implications, and operational considerations.
The U.S. legal landscape for crypto is changing
Just two years ago, the United States was well on its way to becoming one of the world’s strictest crypto regulators. Today, the executive branch of the U.S. government has committed to making the country the crypto capital of the world.
The new, more crypto-friendly administration is already enacting major changes, especially in the Securities and Exchange Commission’s collaborative approach to crypto regulation and its Crypto Task Force.
The Trump administration has also committed to rolling back several policies from the previous administration and called for agencies to propose a coordinated federal framework for digital assets.
What does this mean for founders?
- SEC Activity: Under SEC Chair Paul Atkins, enforcement activity appears to have slowed. The agency is engaging more actively with the public, from hosting roundtables to soliciting feedback, which may enable crypto industry leaders to support a positive future for the industry, as well as clarify how securities laws apply to crypto businesses.
- CFTC Programs: The Commodity Futures Trading Commission has announced a Digital Asset Markets Pilot Program to explore tokenized collateral and other market innovations.
These changes suggest a potential easing of regulatory pressure or a shift toward clearer federal guidance. That said, regulation is still evolving, and future federal actions could shift again depending on political outcomes.
Why crypto startups may choose the U.S. despite regulations
There are critical reasons that a crypto business should consider forming a U.S. entity. These include, but aren’t limited to:
- Venture capital access: The U.S. is home to the majority of high-value venture capital, which is a major selling point for founders seeking to raise capital.
- Credibility: A U.S. legal presence can help establish trust with customers, regulators, and partners, especially in a sector that is more commonly associated with scams, rug pulls, and other fraudulent actors.
- Cheaper energy: Crypto activities, such as mining, consume an incredible amount of energy. Many crypto firms have taken advantage of more affordable energy to create mining operations.
- Operational simplicity: For teams planning to hire in the U.S., set up local banking, or contract with U.S. companies, a domestic entity often makes operations smoother, compared to a Cayman Islands entity.
Of course, these benefits also come with increased scrutiny. U.S. regulation is layered, and compliance can be a significant lift, not to mention the potential impact of tariffs and immigration concerns.
When a U.S. entity might be worth considering
Founders might find it helpful to consider a U.S. entity if:
- They are raising capital from U.S. investors.
- They require access to U.S. banking, payroll, or insurance services.
- They plan to hire U.S.-based employees.
- They are targeting a sizable U.S. user base.
In these scenarios, a Delaware C corp is popular due to its ability to have unlimited shareholders, multiple stock classes (essential for venture funding), and any type of shareholder. Delaware also offers strong privacy protections; you don’t need to list directors or officers in public filings, and only a registered agent address is required.
Wyoming may also be a consideration depending on the structure and purpose of a crypto entity. The state is known for passing crypto-friendly laws, especially for decentralized autonomous organizations (DAOs).
Not all states are equally suited for crypto businesses
While Wyoming, Delaware, Texas, Florida, and New Hampshire all offer attractive incentives for crypto companies, from business privacy to no state income tax, other states have taken a more hardline approach to crypto entities.
For example:
- New York requires crypto businesses to register for a BitLicense, which can lead to increased expenses, alongside high state and New York City taxes.
- California passed a regulatory framework based on New York’s BitLicense, in addition to having the highest state income tax in the country.
- Hawaii’s high income taxes (up to 11%) and capital gains tax at 7.25%, plus its history of requiring businesses to get permission to engage in cryptocurrency transactions, may not be attractive for crypto entities.
When a U.S. entity may not make sense
Even if a business understands which states have more crypto-friendly laws, a U.S. entity might not be the best fit for a crypto business in general if:
- The team and user base are located mainly outside the U.S.
- The project does not involve U.S. fundraising or infrastructure.
- The goal is to limit U.S. tax and regulatory exposure.
In these cases, some founders look to jurisdictions like Switzerland, the United Arab Emirates, the Cayman Islands, or Singapore. That said, U.S. jurisdiction may still apply if U.S. users are involved.
Hybrid models and entity design
Some projects may work best with a hybrid approach. For example, a non-U.S. parent company might own a U.S. operating subsidiary, which can support fundraising or hiring in the U.S. while keeping other business activity overseas.
Another variation separates protocol development from user-facing operations. This may reduce some risks, but legal exposure depends on how the structure is implemented. Regulators can sometimes view tightly integrated entities as part of a single enterprise, which could defeat the purpose.
With all of this to keep in mind, it’s critical to work with a business law firm with attorneys experienced in cryptocurrency regulation and litigation to support the best possible path forward for your business.
Building a future for your business
Cryptocurrency founders looking to establish U.S. entities face a number of complex legal considerations, but may also gain a significant competitive advantage if they can navigate and use those legal complexities to their advantage.
For legal guidance on how U.S. laws and regulations could affect your crypto venture, contact the Law Offices of Andrew Dressel LLC.