SEC Proposes Reg Crypto, Establishing Legal Pathways for Certain Token Public Offerings and Investment Contract Exits

Odaily News - Galaxy Research Head stated on X platform that the U.S. Securities and Exchange Commission proposed the "Regulation Crypto Assets" (Reg Crypto) on August 18. The proposal aims to establish a legal pathway for certain tokens to be offered to the U.S. public and to create a mechanism for terminating investment contracts. The scope applies only to crypto assets that are not themselves securities but were previously issued or sold as part of an investment contract. Tokenized stocks, bonds, and arrangements bundling tokens with equity or other securities are not covered by the framework.

The proposal sets out four stages: fundraising, disclosure, building, and exit. A one-time startup exemption allows issuers to raise up to $5 million over a maximum of 4 years; a higher-limit exemption modeled on Regulation A permits raising $20 million or $75 million within 12 months. Relevant fundraising must undergo SEC qualification review and ongoing disclosure, with unaccredited investors' investment capped 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 construction commitments and progress.

Once an issuer completes or permanently ceases relevant construction obligations, makes no new construction 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 that did not use the above fundraising exemptions may also use this safe harbor. The SEC estimates that approximately 475 issuers per year would use the investment contract safe harbor, and about 130 issuers would use the two new exemptions. Qualified issuances would not constitute restricted securities and could 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 address exchanges, brokers, dealers, or custody, nor does it constitute a standalone innovation exemption for tokenized securities and on-chain trading. 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 was authored by Alex Thorn.