SEC Proposes Rules to Streamline Capital Formation for Digital Asset Entrepreneurs

The Securities and Exchange Commission (SEC) proposed new rules that it said in a Tuesday (Aug. 18) press release would create a clear framework for certain investment contracts involving crypto assets.

Dubbed “Regulation Crypto Assets,” the proposed rule will be open for a 60-day public comment period following its publication in the Federal Register, according to the release.

The proposed rules include two exemptions from the registration requirements of the Securities Act of 1933 that are tailored to certain investment contracts involving crypto assets: a one-time exemption that would permit offerings of up to $5 million during a four-year period, and an exemption that would permit offerings of up to $75 million during each 12-month period, the release said.

In addition, the proposed rules include a conditional safe harbor from the term “investment contract” in the definitions of “security” in the Securities Act of 1933, and preempt state securities law registration and qualification requirements regarding offers and sales of securities issued pursuant to an exemption in Regulation Crypto Assets, per the release.

“As we continue the Commission’s efforts to provide clarity for crypto markets, and as Congress works to establish a lasting regulatory framework, Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws,” SEC Chairman Paul S. Atkins said in the release.

Together with the SEC’s March interpretation clarifying how federal securities laws apply to certain crypto assets and transactions involving crypto assets, the proposed Regulation Crypto Assets provides a securities offering regime designed to encourage responsible capital formation and innovation in domestic crypto asset markets, according to the release.

“Congress designed our securities laws to amplify — within specific guardrails — opportunities for entrepreneurs to innovate and build new products,” Atkins said in the release. “Advancing this regulatory framework is a key element in our strategy to advance the rulebooks for the modern era and another step by the Commission to onshore innovation in crypto asset markets for generations to come.”

It was reported Tuesday that with crypto legislation stalled, regulators are moving in to set crypto policies of their own.