U.S. SEC Unveils First Major Proposal for Crypto Regulation

The U.S. Securities and Exchange Commission on Tuesday released its first major proposed rule aimed at bringing crypto securities offerings under a dedicated framework, an early move toward establishing a permanent "Regulation Crypto Assets" rule for digital assets. The step is viewed as significant as Congress has yet to pass a comprehensive crypto market structure law. The proposal, which surfaced unexpectedly after the SEC cancelled an Aug. 14 meeting that was set to consider the same rule, would create two exemption pathways for crypto securities offerings. One would permit a one-time offering of up to $5 million over a four-year period. The other would allow offerings of up to $75 million in each one-year period. Under both exemptions, issuers would need to provide principles-based narrative disclosures to investors, the SEC said. Issuers relying on the second exemption would also be required to provide financial statements and comply with ongoing reporting obligations. The draft would also allow certain crypto assets to avoid being categorized as "investment contracts" under securities law. SEC Chairman Paul Atkins said the proposal aligns with the Commission's prior interpretive guidance by offering a safe harbor once an issuer has completed or permanently ceased all essential managerial efforts it represented or promised under an investment contract. The SEC opened a 60-day public comment period. Submissions are typically reviewed for at least several months as the agency prepares a final rule. The proposal is separate from the SEC's other crypto effort, the "innovation exemption" for tokenized securities, which has not yet been released. The timing also coincides with a late push in the Senate to use the final three weeks of floor time next month to complete the Digital Asset Market Clarity Act. After that window, Congress is expected to enter a lengthy recess until after the midterm elections. Atkins stressed that legislation remains essential to delivering durable, "future-proofed" market structure rules that cannot be easily reversed by a future regulator.