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The American Capitulation: How the U.S.

The American Capitulation: How the U.S. Lost the War on Crypto and Pivoted to Win the Future of Finance

For nearly a decade, the relationship between the United States and the cryptocurrency industry has been defined by a cold war of regulatory ambiguity, punctuated by sporadic, high-stakes legal battles. The guiding philosophy of Washington, D.C., particularly the Securities and Exchange Commission (SEC), was one of containment and control through enforcement. This was an era where innovation was chilled by uncertainty, and the industry’s brightest minds were perpetually looking over their shoulders.

Then came 2025.

In a breathtaking series of events that will be studied by historians of technology and finance for decades, the United States executed one of the most significant policy pivots of the 21st century. The year saw the legislative repeal of the crippling banking directive SAB 121, the passage of a landmark federal stablecoin framework in the GENIUS Act, and a historic joint accord between the SEC and the CFTC that welcomed spot Bitcoin and Ethereum products into the heart of Wall Street. The pivot was cemented by a declaration from the new SEC leadership that the foundational assumption of the past — that “most crypto assets are securities” — was fundamentally flawed.

This was not a sudden epiphany. It was a capitulation — a pragmatic surrender born from years of losing legal ground, bleeding technological talent, and awakening to the dire economic consequences of ceding the future of finance to more agile jurisdictions. This is the story of how the United States’ strategy of “regulation by enforcement” failed, and why its subsequent, dramatic shift toward “strategic integration” is set to redefine the global financial landscape.

The Lost Decade — An Anatomy of the “Regulation by Enforcement” Era

To understand the magnitude of the 2025 pivot, one must first dissect the decade of hostility that preceded it. The U.S. approach was not a coherent policy, but a series of defensive reactions that created a climate of profound uncertainty.

The Genesis of Conflict: The ICO Boom and the Howey Test

The original sin, in the eyes of the SEC, was the Initial Coin Offering (ICO) boom of 2017–2018. This Cambrian explosion of token sales, fueled by speculative frenzy, was the moment the industry flew too close to the sun. In response, the SEC unsheathed its primary weapon: the Howey Test. Derived from a 1946 Supreme Court case concerning a Florida orange grove, this four-prong test was designed to determine if a transaction qualifies as an “investment contract” and thus a security.

The SEC’s application of Howey was brutally effective but intellectually clumsy. It was a 20th-century legal framework being retroactively applied to a 21st-century technology. The infamous 2017 DAO Report was the SEC’s shot across the bow, declaring that a decentralized autonomous organization’s tokens were securities. This set the stage for years of enforcement actions that treated nearly every token issuance, regardless of its utility or decentralization, as an unregistered securities offering.

The War of Attrition: Landmark Battles Against the Industry

The period from 2018 to 2024 was characterized by the SEC’s strategy of suing projects into submission or clarity. This created a chilling effect, but it also galvanized the industry to fight back, leading to landmark legal battles that began to expose the cracks in the SEC’s absolutist stance.

• Ripple (XRP) vs. The SEC: The First Breach in the Wall
  The SEC’s multi-year lawsuit against Ripple was meant to be a decisive victory that would solidify its jurisdiction over the entire altcoin market. Instead, it became the agency’s most significant legal setback. In her 2023 ruling, Judge Analisa Torres delivered a nuanced verdict that shattered the SEC’s monolithic view. She distinguished between Ripple’s direct sales of XRP to institutional investors (which she deemed securities) and programmatic sales on public exchanges to retail buyers (which she did not).
• This was a seismic event. For the first time, a U.S. court acknowledged that the nature of an asset could depend on the context of its sale. It invalidated the SEC’s lazy argument that “the token itself is the security” and forced a more sophisticated analysis, providing a legal foothold for the entire secondary market.
• Coinbase vs. The SEC: Forcing the Question of a Workable Framework
  If the Ripple case was about the nature of an asset, the SEC’s lawsuit against Coinbase was a battle for the soul of the market infrastructure. By suing the largest and most regulated U.S. exchange for listing what it deemed to be unregistered securities, the SEC was attempting to dismantle the entire American crypto trading ecosystem.
• Coinbase’s strategy was audacious: it effectively invited the lawsuit, demanding that the courts provide the clarity that the SEC refused to offer through rulemaking. This legal gambit highlighted the absurdity of the situation — an entire industry was being governed by ad-hoc enforcement actions rather than a clear, prospective set of rules. The case also brought critical issues like staking-as-a-service into the legal arena, questioning whether network participation constituted a securities offering.

The Banking Firewall: Staff Accounting Bulletin 121 (SAB 121)

Perhaps the most damaging and strategically significant move of this era was the SEC’s issuance of SAB 121. On its face, it was a technical accounting guideline. In practice, it was a poison pill designed to prevent regulated U.S. banks from entering the digital asset custody business at scale. By requiring banks to hold custodied crypto assets on their own balance sheets — a crippling capital requirement not applied to any other asset class — the SEC effectively firewalled the traditional banking system from the crypto ecosystem. This ensured that the trillions of dollars managed by U.S. financial institutions remained siloed, stifling institutional adoption and protecting the incumbent financial order.

The Catalysts for Capitulation — Why the Old Strategy Became Untenable

By the end of 2024, the “regulation by enforcement” strategy was collapsing under the weight of its own contradictions, driven by a confluence of economic, judicial, and geopolitical pressures.

The Economic Imperative: A Nation Bleeding Innovation and Capital

The primary driver of the pivot was a dawning realization in Washington that the U.S. was committing an act of massive economic self-harm.

• The Brain and Capital Drain: While the U.S. created regulatory chaos, other jurisdictions — Dubai, Singapore, Hong Kong, and even the E.U. with its MiCA framework — were creating clarity. This resulted in a tangible exodus of talent, startups, and investment capital from the United States. The U.S. was actively forfeiting its leadership position in the next generation of financial technology.
• The Specter of National Debt and the Future of Capital Markets: In an era of soaring national debt and intensifying global competition, the U.S. cannot afford to fall behind in financial innovation. The tokenization of real-world assets (RWAs) represents a multi-trillion-dollar revolution in the efficiency and accessibility of capital markets. The prospect of the next generation of global securities trading on infrastructure built and regulated in Asia or Europe became a national competitiveness issue. The U.S. needed its capital markets — its greatest strategic asset — to be the home of this innovation, not a laggard.
• The Undeniable Success of the Bitcoin ETFs: The SEC’s reluctant approval of spot Bitcoin ETFs in early 2024 turned into a runaway success. The massive inflows, flawless market operations, and enthusiastic participation from titans like BlackRock and Fidelity proved two things: there was enormous institutional demand for these products, and the market was mature enough to handle them safely. This created a powerful Wall Street lobby for further product expansion and made the SEC’s continued obstructionism look increasingly unreasonable.

The Judicial Checkmate and Political Realignment

The SEC’s legal setbacks in cases like Ripple demonstrated that its authority was not absolute. The judiciary was increasingly acting as a check on regulatory overreach, forcing the agency to confront the limitations of its antiquated legal tests.

Simultaneously, crypto was transforming from a fringe issue into a potent, bipartisan political force. A growing number of lawmakers in Congress began to see the economic and geopolitical risks of the SEC’s approach, leading to the introduction of serious legislative proposals aimed at creating clear rules of the road. The political winds had shifted, making the status quo untenable.

The Great Pivot of 2025 — Forging a New American Crypto Doctrine

The events of 2025 were the logical culmination of these mounting pressures — a rapid, cascading series of policy changes designed to reverse the damage and reclaim American leadership.

• January: The Demolition of SAB 121
  The year began with the legislative repeal of SAB 121. This was the first and most crucial domino to fall. It was not a mere accounting adjustment; it was the symbolic and practical demolition of the wall separating the U.S. banking system from the digital asset ecosystem. This single act unleashed the pent-up demand from U.S. banks and trust companies to offer institutional-grade crypto custody, providing the foundational layer of trust and security that large institutions had been waiting for.
• June: The GENIUS Act and the Crowning of the Digital Dollar
  The passage of the (fictional) “Government-Enabled National Infrastructure for U.S. Dollar Stablecoins” (GENIUS) Act was the legislative cornerstone of the new era. For the first time, Congress provided a clear, federal framework for stablecoins, recognizing them as a legitimate financial instrument and tethering them to the value of the U.S. dollar. This act solved one of the biggest regulatory ambiguities, transforming stablecoins from a gray-market curiosity into a fully regulated, digital representation of the U.S. dollar. It was a masterstroke for dollar dominance in the 21st century.
• September: The SEC/CFTC Accord and the Atkins Doctrine
  The climax arrived in September. The SEC and the Commodity Futures Trading Commission (CFTC) issued a historic joint statement, ending their multi-year turf war over jurisdiction. They formally invited registered exchanges like NASDAQ and the CME to develop and list spot Bitcoin and Ethereum products, to be regulated under the same robust standards as traditional stocks and futures. This provided a clear, unambiguous pathway for the two largest digital assets to be fully integrated into the heart of the U.S. financial system.

This was followed by a landmark speech from the new, more pragmatic SEC leadership, articulating what would become known as the “Atkins Doctrine.” The declaration that “most crypto assets are not securities” was a formal repudiation of the previous administration’s overreaching agenda. It signaled a move away from the blunt Howey Test as a universal hammer and toward a more nuanced, case-by-case analysis that acknowledges concepts like utility, decentralization, and the nature of secondary market transactions. This provided the crucial breathing room for the thousands of other tokens and projects that had been living in legal limbo.

Conclusion: From Adversary to Architect — America’s Bid for Crypto Supremacy

The Great Pivot of 2025 marks the end of one era and the beginning of another. The United States has ceased fighting a futile, self-destructive war against a paradigm-shifting technology. It has instead chosen to become the primary architect of the global, regulated future of the digital asset class.

This new doctrine will unleash a torrent of innovation and institutional capital that was previously held back by uncertainty. The rules of the game have changed. The challenge for the industry is no longer how to survive in the absence of rules, but how to thrive within a complex, comprehensive, but ultimately clear regulatory framework.

The “Wild West” era of American crypto is over. An era of maturation, integration, and unprecedented scale has begun. By choosing to compete rather than to abdicate, the United States has made a powerful bid to ensure that the next chapter of the internet of value will be written, in large part, in America. The war is over; the race has just begun.

The American Capitulation: How the U.S. was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.