According to ChainCatcher, Galaxy’s head of research said in a post on X that the U.S. Securities and Exchange Commission has proposed Regulation Crypto Assets, or Reg Crypto.
The proposal is designed to create a lawful path for certain token issuances to the U.S. public and to establish a mechanism for terminating an investment contract. It would apply only to crypto assets that are not securities by nature but were issued or sold as part of an investment contract. Tokenized stocks, bonds, and arrangements that bundle tokens with equity or other securities are outside the framework.
Four-stage structure for fundraising and exit
The proposal sets out four stages: fundraising, disclosure, development, and exit.
A one-time startup exemption would allow an issuer to raise up to $5 million over as many as four years. A higher-tier exemption modeled on Regulation A would allow fundraising of $20 million or $75 million within 12 months.
Those fundraising rounds would be subject to SEC qualification review and ongoing disclosure requirements. For investors who are not accredited, the investment cap would be 10% of the higher of annual income or net assets.
Disclosure requirements for token projects
Issuers would also need to disclose token supply and release schedules, mint and burn mechanisms, governance and smart contract authority, source code, and their project development commitments and progress.
Once an issuer has completed or permanently stopped the relevant development obligations, has made no new development commitments, and has filed a transition report, the related investment contract would be treated as terminated. The crypto asset would then no longer be subject to securities law under that investment contract. Issuers that do not use the fundraising exemptions could still use the safe harbor.
SEC estimates annual usage
The SEC estimates that about 475 issuers a year would use the investment contract safe harbor, while about 130 issuers would use the two new exemptions. Eligible issuances would not have to be treated as restricted securities and could be resold immediately without contractual transfer limits.
The proposal would also preempt state registration and qualification requirements for covered initial issuances and some secondary trading. It does not cover exchanges, brokers, dealers, or custody, and it is not a separate innovation exemption for tokenized securities or on-chain trading.
The public comment period will run for 60 days after publication in the Federal Register. SEC Chair Paul Atkins and commissioners Hester Peirce and Mark Uyeda all issued statements in support.