The U.S. Securities and Exchange Commission proposed Regulation Crypto Assets, or Reg Crypto, on Aug. 18, according to a post on X by Galaxy Head of Research Alex Thorn.
The proposal would create a legal path for certain token offerings to the U.S. public and set up a mechanism for terminating the investment contract status attached to some crypto asset sales.
Scope limited to certain crypto assets
Reg Crypto would apply only to crypto assets that are not securities by themselves but were offered or sold as part of an investment contract. Tokenized stocks and bonds are excluded, as are arrangements that tie a token to equity or other securities.
Four-stage framework for fundraising and exit
The proposal is structured around four stages: fundraising, disclosure, development, and exit.
A one-time startup exemption would let an issuer raise up to $5 million over a period of as long as four years. A higher exemption modeled on Regulation A would allow fundraising of $20 million or $75 million within 12 months.
Those offerings would be subject to SEC qualification review and ongoing disclosure requirements. For non-accredited investors, the investment cap would be 10% of whichever is higher, annual income or net worth.
Disclosure obligations for issuers
Issuers would have to disclose token supply and release schedules, mint and burn mechanics, governance and smart contract permissions, source code, and the project’s development commitments and progress.
How the investment contract status would end
Once an issuer has completed or permanently halted the relevant development obligations, stopped making new development commitments, and filed a transition report, the related investment contract would be treated as terminated. At that point, the crypto asset would no longer be subject to securities laws under that investment contract.
Issuers that did not use the fundraising exemptions could still use the safe harbor.
SEC usage estimates and resale treatment
The SEC estimates that about 475 issuers per year would use the investment contract safe harbor, and about 130 issuers would use the two new exemptions.
Eligible offerings would not be treated as restricted securities and could be resold immediately without contractual transfer restrictions.
What the proposal does not cover
The proposal would also preempt state registration and qualification requirements for covered primary offerings and some secondary trading. It does not address exchanges, brokers, dealers, or custody, and it is not a separate innovation exemption for tokenized securities or onchain trading.
The comment period would run for 60 days after publication in the Federal Register.
SEC Chair Paul Atkins and Commissioners Hester Peirce and Mark Uyeda each issued statements in support, Thorn said.
The article was written by Alex Thorn.