Crypto Startups Shift Focus From Offshore Jurisdictions Amid Global Policy Changes

For much of the last decade, offshore jurisdictions were the primary option for crypto startups and decentralized finance (DeFi) projects due to the hostile stance of many governments towards digital assets. Crackdowns, enforcement actions, and public skepticism limited the options for firms to offer crypto services. However, this landscape is rapidly changing as more jurisdictions around the world, including China, Morocco, and Ukraine, are reconsidering the legality of crypto trading following the pro-crypto stance of leaders like former US President Donald Trump. This shift is placing the viability of traditional offshore setups in question.

Many offshore jurisdictions are now facing pressure from the public to conform to standardized rules, as world leaders show a changing attitude towards crypto. Regulated jurisdictions like the United Arab Emirates (UAE) are offering what offshore markets increasingly cannot: access to institutional infrastructure and regulatory clarity. If more countries embrace digital currencies, the business for offshore firms could significantly decline.

Entrepreneurs have long faced stiff resistance from governments, which frequently issue warnings and prosecute founders. In the US, critics argued that watchdogs like the Securities and Exchange Commission (SEC) were stifling crypto adoption through “regulation by enforcement.” This approach led to several high-profile cases, including the sentencing of project leaders to prison and fines, such as the $50 million penalty imposed on Ripple. For regulators, the narrative around crypto was often tied to fraud, narcotics, and illicit finance.

Under such conditions, launching a blockchain project within an unclear regulatory regime was virtually unthinkable. Entrepreneurs fled to offshore jurisdictions with looser legal oversight and minimal reporting requirements. Since 2015, regions like the Caribbean, Eastern Europe, and Southeast Asia have helped crypto projects operate without immediate regulatory threats. However, today, governments in regions such as the EU and the UAE now have detailed legal frameworks to govern crypto activity.

The UAE, in particular, is courting blockchain startups, Web3 developers, and fintech innovators with what some consider the “most progressive crypto regulations in the world.” DeFi companies operating in the UAE have access to local banks, fiat payment gateways, and secure digital asset custody services, resources often out of reach in offshore setups. In Europe, the Markets in Crypto Assets (MiCA) regulations have made 80% of European financial institutions recognize the importance of blockchain technology to the economy. According to Coinbase France manager Côme Prost-Boucle, “MiCA has provided the clarity needed to accelerate innovation in the EU’s crypto economy… In the US, we’re seeing a clear pro-innovation policy, with serious momentum behind stablecoin and market structure reform. Europe can’t afford to watch from the sidelines.”

Despite the growing friendliness of countries towards digital assets, offshore jurisdictions remain crucial for DeFi projects in their early stages. Decentralization poses a significant challenge for companies trying to fit into traditional compliance models. Regulators have yet to establish workable systems that oversee DeFi operations without compromising its core principles like permissionless access and decentralized governance. Economics author John Paul Koning noted, “A lot of the stuff people are building on DeFi would be illegal if tried in real life. Can’t start an exchange (like Uniswap) in meat space without registering with the SEC/CFTC, or build a bank (Maker) without getting a charter, or an MSB (Curve) without getting an MSB license.”