SEC Proposes Regulation Crypto Assets, Its First Major Crypto-Specific Offering Rules, With Two Exemptions and a Safe Harbor

The SEC’s Reg Crypto proposal would exempt smaller token offerings from registration and give issuers a certified path out of securities treatment.

SEC Tuesday proposed Regulation Crypto Assets, the agency’s first rulemaking written specifically for crypto asset offerings. The package would create two exemptions from registration under the Securities Act of 1933 and a conditional safe harbor that can sever a token from the investment contract it was sold under. It landed days after the commission scrapped a Friday meeting called to consider the same proposal, citing an “unforeseen scheduling issue.”

The startup exemption would cover offerings up to $5 million across a four-year window, conditioned on public filings at the start and end of that period plus principles-based narrative disclosures to investors. The fundraising exemption, modeled partly on Regulation A, is two-tiered: $20 million in any 12-month period under Tier 1 and $75 million under Tier 2, which requires audited financial statements and ongoing reporting. Antifraud and antimanipulation rules still apply to both. A new definition of “qualified purchaser” would preempt state registration and qualification requirements, including for certain secondary market trades.

This story is an excerpt from the Unchained Daily newsletter.

The proposed rule also includes a conditional safe harbor. An issuer that has completed or permanently ceased all essential managerial efforts it promised, and files a certification with supporting analysis, would see the covered investment contract deemed to have ceased to exist, taking the underlying asset outside the statutory definition of a security. Coinbase chief policy officer Faryar Shirzad described the architecture as both an on-ramp and an off-ramp, arguing that securities law cannot be a one-way door.

The proposal builds on the joint SEC and CFTC interpretation issued March 17, which declared most crypto assets non-securities and introduced a token taxonomy. Atkins credited Commissioner Hester Peirce, whose 2020 “Running on Empty” remarks first floated a token safe harbor, and Peirce said she wants comment on letting tokens function more like equity in the networks they fund. All three sitting commissioners are Republican, and the comment period runs 60 days from Federal Register publication.

The commission sent the draft to the White House for interagency review in April.

Related Listen: Should Crypto Tokens Come With Investor Rights? – Uneasy Money