- Reg Crypto would allow qualifying issuers to raise up to $5 million over four years or $20 million or $75 million annually.
- The proposal could let certain tokens exit investment-contract status after issuers complete required development work and filings.
- Galaxy’s Alex Thorn says fast SEC action could bring the framework into effect before 2027, subject to comments and legislation.
The SEC proposed Regulation Crypto Assets on August 18, creating a new framework for certain token offerings. Galaxy’s Alex Thorn said the proposal could provide a regulated route for U.S. token issuance. The framework also creates a process for ending an investment contract after an issuer completes its promised work.
Reg Crypto Sets Token Issuance Rules
According to Thorn, Reg Crypto applies to crypto assets that are not securities themselves. However, the assets must have been sold through investment contracts involving promised development work.
The proposal creates two fundraising exemptions. One startup exemption would allow up to $5 million over four years. A larger exemption would allow offerings of $20 million or $75 million over 12 months.
The amount would depend on the applicable tier. Both options require filings and specific disclosures. Tier 2 offerings would also require audited financial statements. The rules would require information about token supply, release schedules, minting, burning, governance, and smart-contract permissions.
Issuers would also explain their projects and development progress. Notably, the proposal would allow some non-accredited investors to participate. Their purchases would face limits based on annual income or net worth.
SEC Creates a Path for Token Exits
Reg Crypto also addresses what happens after an issuer finishes its promised development work. Under the proposal, the related investment contract could cease to exist after required conditions and filings.
The safe harbor could also cover tokens issued years ago without using the new fundraising exemptions. Thorn said this could help address assets with unresolved securities-law status. The SEC estimates about 475 issuers could use the safe harbor annually.
It estimates roughly 130 offerings could use the two fundraising exemptions. Meanwhile, covered tokens could become immediately transferable under the proposal. The framework would also preempt certain state registration requirements.
SEC Proposal Faces Comments and Timing
The proposal does not cover exchanges, brokers, dealers, custody, or tokenized securities. Comments are due 60 days after publication in the Federal Register. The SEC canceled its August 14 open meeting before releasing Reg Crypto four days later.
Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda issued supportive statements. Thorn said adoption before 2027 would require a fast timetable. He also noted that Congress could still affect the framework through future legislation.