SEC Unveils Proposed Regulation Crypto Assets Framework for U.S. Capital Raising

The U.S. Securities and Exchange Commission has proposed a new framework dubbed Regulation Crypto Assets that would let certain eligible crypto-related projects raise capital without registering the offering under the Securities Act, up to a defined limit. Under the proposal, issuers could use a larger fundraising exemption allowing offerings of as much as $75 million in any 12-month period. A smaller pathway would cap offerings at $5 million over a four-year period. The SEC describes the offerings covered by these exemptions as "covered investment contracts," and the exemptions would provide tailored alternatives to Section 5 registration for certain investment contracts involving crypto assets. Issuers relying on either exemption would have to provide principles-based narrative disclosures and would remain subject to federal antifraud and anti-manipulation provisions. The larger $75 million exemption would also require financial statements and compliance with ongoing reporting requirements. The SEC said financial-condition disclosures would include financial statements that must be audited at certain capital-raising thresholds. A separate pillar of the proposal is a conditional safe harbor addressing when an investment contract linked to a crypto asset could be treated as no longer applying. The SEC said a crypto asset could be deemed not subject to an investment contract if the issuer certifies to the agency that it has ceased or terminated all essential managerial efforts it promised to undertake under that investment contract and meets the other conditions of the safe harbor. SEC Chairman Paul Atkins said the proposal is aimed at non-security crypto assets that are nonetheless subject to an investment contract. He said issuers have been forced to fit into existing SEC rules not designed for these assets, a dynamic he argued has impeded capital formation and innovation, pushed investment offshore, and reduced protections available to U.S. investors. Atkins also credited Commissioner Hester Peirce's long-running safe harbor proposal as a key foundation for the new framework. Industry voices said clearer rules could change the U.S. issuance pipeline. Deepankar Kapoor, Chief Growth Officer for Global Markets at compliancefirst digital asset marketplace eXchange1, said a defined $75 million tier paired with financial reporting could bring more well-disclosed projects to market. He added that platforms building stronger due diligence capabilities ahead of an expected wave of compliant offerings may be best positioned to capture new activity. Atkins said legislation remains essential to create durable rules that cannot be easily reversed by future regulators, and said the SEC will continue supporting Congress in advancing the CLARITY Act to President Trump. Next steps: the SEC release lists Regulation Crypto Assets as a proposed rule under File Number S7-20-26-27. Public comments are due on or before 60 days after publication in the Federal Register. The SEC said comments can be submitted online using the file number and will be posted to the agency's website.