SEC Floats "Reg Crypto" Framework With USD 5M Startup Exemption and USD 75M Tier

The U.S. Securities and Exchange Commission has unveiled a proposal dubbed "Regulation Crypto Assets" ("Reg Crypto"), introducing a tiered issuance regime designed to make capital raising easier for crypto projects. The move comes as Congress continues to stall on the broader Clarity Act. Reg Crypto would operate as a standalone exemption below the full registration requirements of the Securities Act of 1933. Instead of treating offerings as an all-or-nothing choice between full registration and limited legacy exemptions, the proposal scales disclosure and reporting obligations to the size of the raise. Two thresholds anchor the draft. A startup exemption would cover offerings up to USD 5 million, providing a four-year window during which issuers would not have to register under the 1933 Act. A second tier would permit up to USD 75 million in offerings per twelve-month period. Amounts above that cap would still fall under the normal registration pathway. Both tiers include conditions. Issuers would be required to provide investor disclosures, and the USD 75 million fundraising tier would also carry ongoing reporting obligations. Market observers have likened the structure to existing small-offering regimes such as Reg CF and Reg A, but tailored specifically to crypto assets. The proposal also introduces a conditional safe harbor aimed at addressing a long-running industry dispute: whether a token can transition out of securities status as decentralization increases. Under the SEC's draft, a digital asset could cease being treated as a security only if specified conditions are met, including the end of managerial efforts. The shift would not occur automatically. The federal-state split is another key element. For offerings relying on the new federal exemptions, the draft would prevent states from imposing separate registration requirements, reducing the need for issuers to navigate parallel state rulebooks. Reg Crypto is distinct from the SEC's separate "Innovation Exemption" initiative focused on tokenized assets. Commissioner Hester Peirce described the new proposal as incremental progress, saying, "This proposal is a step on a long road toward a clear, sensible and enforceable regulatory framework for crypto." The plan builds on joint SEC-CFTC guidance issued in March 2026 stating that most digital assets are not securities. That conclusion, in the SEC's view, increases the need for a tailored framework to address the subset of offerings that still fall under securities laws. The Commission's current composition is also notable. Under Chair Paul Atkins, the SEC is entirely Republican, with Democrats holding no seats. The agency's posture is viewed as more innovation-friendly than under former Chair Gary Gensler, whose tenure was associated with a regulation-by-enforcement approach. The SEC had initially scheduled an August 14 meeting to unveil the rule but canceled it at short notice, citing an unexpected scheduling issue. The proposal was released four days later. A 60-day public comment period will begin once the rule is published in the Federal Register. The SEC will review feedback before determining a final version. The regulatory initiative arrives amid legislative gridlock. The Clarity Act, intended as a comprehensive federal framework for digital assets, remains stuck in Congress. Disputes include whether stablecoin providers should be allowed to pay interest on stablecoin balances, and questions tied to potential conflicts of interest involving President Donald Trump. A procedural Senate vote is scheduled for mid-September, though timing is tight as attention shifts toward the November elections. At a SALT conference panel held the same day, White House crypto adviser Patrick Witt suggested the SEC and CFTC could pursue additional rulemaking if Congress fails to pass the Clarity Act in time. For now, the regulatory track is moving faster, though it would not replace legislation and could be revisited by a future Commission with a different majority.