Galaxy Research Head Says SEC Is Proposing Crypto-Only Rules That Could Open a Legal Path for Token Issuance in the U.S.

Galaxy research head Alex Thorn said the U.S. Securities and Exchange Commission proposed a new crypto-specific rule set on Aug. 18 that could give U.S. token issuers a legal path to raise money and sell tokens. The proposal, called Regulation Crypto Assets, or Reg Crypto, is designed for crypto asset issuance and sales instead of applying traditional stock rules to tokens. Thorn said it could do two things: let qualified token projects sell to the public, including non-accredited investors, and create a formal process for token-related investment contracts to end once certain conditions are met. Reg Crypto would apply to crypto assets that are not securities themselves but were issued or sold as part of an investment contract. Thorn broke the framework into four stages: fundraising, disclosure, development, and exit. In the fundraising stage, the proposal adds two exemption paths. A startup exemption would allow a project to raise up to $5 million over as long as four years. A larger exemption, similar to Regulation A, would allow between $20 million and $75 million over 12 months. In the disclosure stage, issuers would need to disclose information tailored to crypto assets, including token supply, unlock schedules, minting and burning mechanisms, governance rights, smart contract information, source code, and project progress. During the development stage, project teams would be allowed to complete the core work they promised investors within the required timeframe. In the exit stage, once a project finishes or stops those obligations and submits a transition report, the related investment contract could be deemed terminated, and the token would no longer fall under that contract’s securities rules. Thorn said the main significance of Reg Crypto is that it creates a “token lifecycle” framework. A token could start out tied to an investment contract because of development promises, then later leave that status through a defined process as the project matures. The SEC expects roughly 475 issuers a year could use the investment contract safe harbor mechanism, while about 130 projects are expected to use the new fundraising exemptions. Thorn said that suggests the rule’s near-term impact may be more about clearing up existing regulatory uncertainty for legacy tokens than about triggering a fresh wave of token sales. The proposal is still in draft form. Final adoption would still face regulatory changes, state regulator challenges, and possible effects from congressional legislation. If adopted, Thorn said Reg Crypto could bring what he called a “legal ICO 2.0” to the U.S., creating a new regulatory base for fundraising, token circulation, and investor protection.