I sense this is more of a strategic decision, as providing a local server that works might severely undercut Particle's own cloud-based offerings. But this decision is also walling off developers that need to build encrypted 'off-the-grid' setups. Some of us (like @frlobo) wrote custom implementations. I've moved to using mqtt over tls (using alternative hardware platforms) for offline projects, but it's just such a pity.
Not every project requires, or has the ability to have an internet connection. Many clients wall off their networks for security reasons, or require enterprise-level authentication (another separate issue discussed elsewhere).
I only hope that we get basic operability back, and maintain that basic operability just so offline projects can continue to be developed using Particle products.
A suggestion: Why not declare support for a bare-bones model for local cloud? Allow connect, claim, rudimentary SSE (no wildcards/no prefix filtering/no webhooks needed), allow variables, functions to be called?
If product cannibalisation is a concern, perhaps offer local cloud as single-seat licenses that we can purchase and activate? I'd gladly do that if that guarantees the continued support for local cloud.