SEC proposes Reg Crypto, establishing a legal pathway for certain token public offerings and investment contract exits

Odaily Planet Daily News Galaxy Research Director posted on X platform that the U.S. Securities and Exchange Commission proposed the "Regulation Crypto Assets" on August 18, abbreviated as Reg Crypto. The proposal aims to establish a legal pathway for certain tokens to be offered to the U.S. public and to set up a mechanism for terminating investment contracts. The scope of application is limited to crypto assets that are not securities themselves 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 not covered by the framework.

The proposal sets up four stages: fundraising, disclosure, development, and exit. A one-time startup exemption allows issuers to raise up to $5 million within a maximum of 4 years; a higher-limit exemption modeled on Regulation A allows raising $20 million or $75 million within 12 months. Relevant fundraising must undergo SEC qualification review and continuous disclosure, with unaccredited investors' investment caps set at the higher of 10% of their annual income or net worth. Issuers must also disclose token supply and release schedules, minting and burning mechanisms, governance and smart contract permissions, source code, as well as project development commitments and progress.

Once an issuer completes or permanently ceases relevant development obligations, makes no new development commitments, and submits a transition report, the relevant investment contract will be deemed terminated, and the crypto asset will no longer be subject to securities laws under that investment contract. Issuers who do not use the above fundraising exemptions can also use this safe harbor. The SEC estimates that approximately 475 issuers will use the investment contract safe harbor annually, and about 130 issuers will use the two new exemptions. Qualifying issuances may not be classified as restricted securities and can be immediately resold without contractual restrictions.

The proposal also excludes covered initial offerings and certain secondary transactions from state registration and qualification requirements, but does not involve exchanges, brokers, dealers, or custody, nor is it an independent innovative exemption for tokenized securities and on-chain transactions. The comment period is 60 days after publication in the Federal Register. SEC Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda all issued statements of support. The article author is Alex Thorn.