Galaxy Research's Alex Thorn Breaks Down What the SEC's "Reg Crypto" Proposal Could Mean for U.S. Token Offerings

BlockBeats reported that Galaxy Research director Alex Thorn said on Aug. 21 that the U.S. Securities and Exchange Commission (SEC) on Aug. 18 unveiled a proposal called Regulation Crypto Assets, widely dubbed "Reg Crypto." It would be the first U.S. securities rule set written specifically for the issuance and sale of crypto assets, rather than relying on legacy stock-market frameworks. Thorn said the proposal could deliver two major shifts for the U.S. crypto sector. First, it could create a compliant path for eligible token projects to sell tokens to the public, including nonaccredited investors. Second, it could introduce a defined process to formally end the investment-contract status tied to certain tokens once specified criteria are met, potentially reducing the long-running uncertainty over whether many older tokens should still be treated as securities. Under the SEC's approach, Reg Crypto would cover crypto assets that are not securities in and of themselves but were issued or sold as part of an investment contract. Thorn summarized the framework as a four-stage lifecycle: 1) Financing stage: The proposal adds two new issuance exemptions. A startup exemption would allow projects to raise up to $5 million over as long as four years. A larger exemption, modeled on Regulation A, would allow $20 million to $75 million to be raised within a 12-month period. 2) Disclosure phase: Issuers would provide crypto-specific disclosures, including token supply, unlock schedules, mint-and-burn mechanics, governance rights, smart contract details, source code, and updates on development progress. 3) Development phase: Project teams would complete core development commitments to investors within the required timeframe. 4) Exit stage: After completing the project or ending related build-out obligations, and after filing a transition report, the investment contract tied to the tokens could be deemed terminated, with the tokens no longer subject to securities regulation under that investment contract. Thorn argued Reg Crypto's importance is that it would, for the first time, formalize a regulatory framework for a token's lifecycle: tokens may begin as investment contracts due to development-related promises, then shed securities characteristics through a defined process as the project matures. The rule remains a proposal, and Thorn noted that final adoption could be affected by shifts in regulators, state-level authorities, and potential congressional action. If approved, Reg Crypto could open the door to a compliant "ICO 2.0" in the U.S., reshaping standards for project fundraising, token circulation, and investor protection.