Host only original content of which you or your registered users are the declared copyright holders.
Flickr, Smugmug and other enthusiast photo gallery sites seem to have walked this line quite successfully. Imgur and its ilk haven't because they've never really had a reason to care. Now they do.
So YouTube wouldn't be the massive entity it is now if it were truly YouTube and forbade uploading of any derived content. But perhaps that would be better.
MP3 sites might be more like SoundCloud with original content.
I find it difficult to be moved by the protests of people who just want to post other people's creations. Link to it, don't copy it.