SEC proposes new crypto rules: up to $75M in token issuance

The U.S. Securities and Exchange Commission (SEC) has proposed new rules that could reshape how cryptocurrency companies operate within the United States. These rules, unveiled as "Regulation Crypto Assets," aim to establish a framework for investment contracts involving crypto assets, particularly after a legislative effort to clarify digital asset regulation stalled in Congress.

This development arrives after the U.S. Senate failed to advance the Digital Asset Market Clarity (CLARITY) Act before its month-long recess, as reported by Cointelegraph CLARITY Act stalled. The proposed SEC framework seeks to provide a "clear and fit-for-purpose" structure for certain crypto asset investment contracts, according to the regulator.

A "Tailored Securities Offering Regime"

The SEC's proposal outlines a "tailored securities offering regime" designed to allow entities to raise capital while maintaining investor protections. Bitcoin Magazine noted that this framework includes two key exemptions from registration under the Securities Act of 1933 two exemptions outlined.

The first exemption permits issuers to raise up to $5 million in crypto over a four-year period. The second, more substantial exemption allows for the issuance of up to $75 million in any 12-month period, though this comes with additional requirements.

Issuers utilizing the $75 million exemption would be required to provide financial statements and adhere to ongoing reporting obligations, as detailed by Cointelegraph reporting requirements. Both exemptions necessitate narrative disclosures, which are written explanations for investors outlining a business and its associated risks, a point highlighted by Bitcoin Magazine narrative disclosures required.

Notably, the proposed rules also introduce a conditional "safe harbor." Once an issuer has either completed or permanently abandoned the managerial work they promised, their token would no longer be considered an "investment contract" and thus would fall outside the definition of a security, according to Bitcoin Magazine conditional safe harbor.

SEC Chair Paul Atkins stated that the proposal was a step towards "onshoring innovation in crypto asset markets," providing entrepreneurs with clearer paths to capital as Congress works on a lasting regulatory framework. He also expressed the SEC's continued support for Congress in enacting the CLARITY Act, Cointelegraph reported Atkins' statement.

Context of Legislative Stalls

The SEC's move to propose its own rules comes amidst a legislative vacuum. Pro-crypto lawmakers had aimed to pass the CLARITY Act before the August recess, but the vote was postponed to September after Democrats raised concerns about the latest draft, according to Bitcoin Magazine CLARITY Act delay.

Some Republican senators, such as Senator Cynthia Lummis, have accused others of intentionally hindering the bill's progress. Despite the legislative delays, regulators, including CFTC Chairman Michael Selig, have indicated their intention to proceed with rulemaking, aiming to finalize rules before the current administration's term concludes.

Timeline and Further Steps

The public has a 60-day window to comment on the proposed rules following their publication in the Federal Register. This period allows stakeholders to provide feedback and potentially influence the final form of the regulations. The proposal builds upon the SEC's March interpretation of how existing securities laws apply to crypto assets.

What This Means for You

For an ordinary reader, these proposed SEC rules could impact the accessibility and transparency of new crypto asset offerings in the U.S. While the direct implications for individual investors are not immediate, the framework aims to provide more clarity for companies raising capital, which could, in turn, foster a more regulated environment for new projects. This may lead to more standardized disclosures about project risks and financials. The rules do not, however, alter existing tax obligations related to cryptocurrency, nor do they change current employment laws or immediate investment opportunities in established cryptocurrencies. They primarily focus on the initial issuance of new tokens rather than the broader crypto market or individual trading activities.

Sources

This report was written from the outlets below and checked against each of them. It is our own copy, not a syndicated feed — where they disagreed we said so.

• Cointelegraph
• Bitcoin Magazine

How this was made. Written by our crypto desk from 2 independent outlets, with every figure taken from those sources rather than estimated. Anything we could not verify is not in the piece. Corrections run dated at the top — how we handle them · editorial policy.