Article by Meng Yan
On August 18, 2026, the SEC proposed the "Regulation of Crypto Assets," aiming to move beyond years of primarily enforcement-based oversight of token offerings and establish a dedicated public financing framework for crypto assets. The public comment period ended on October 20.
The four most important changes in the new regulations are:
First, provide registration exemptions for early-stage projects, allowing up to $5 million in fundraising over four years without requiring audits or the use of licensed intermediaries.
Second, provide a two-tiered financing exemption for more mature projects, with annual financing limits of $20 million and $75 million, respectively, accompanied by varying levels of disclosure, financial reporting, and audit requirements.
Third, establish a securities-like exit safe harbor. After completing or permanently terminating the promised development work, project teams can submit Form TR to ensure that the associated tokens are no longer considered securities under the original investment contract.
Fourth, federal rules exempt certain offerings from state securities registration requirements, reducing compliance barriers for cross-state issuance and trading.
What do the public think?
Norwegian BI School researcher Mert Erinc has created a publicly accessible tracking website that uses three independent AI reviewers to categorize opinions item by item.
As of October 20, the SEC has received 171 comments, 165 of which have been coded.
Classified by overall position:
- Explicit support: 8, accounting for 5%
- Conditional support: 115, accounting for 70%
- Explicit opposition: 14 responses, accounting for 8%
- Mixed positions: 3, accounting for 2%
- Procedural or off-topic comments: 25, accounting for 15%
It is important to note that 70% conditional support does not mean 70% favor the original proposal’s passage. They generally accept the direction of the reform but request modifications to specific provisions.
Nasdaq explicitly supported it, calling the safe harbor a "carefully designed mechanism" and stating that the disclosure requirements are appropriately tiered. A letter from SkyBridge Capital described the proposal as "thoughtful, measured, and long overdue." The Hyperliquid Policy Center urged swift adoption but requested clarification that filing Form TR does not constitute an admission that prior assets were securities. Ava Labs called it an "important first step," while also arguing that the definition of "crypto assets" is too broad.
Five securities law scholars—Coates, Coffee, Cox, Fox, and Seligman—jointly argued that the proposal contains fundamental flaws. They contend that the startup exemption departs from nearly a century of securities law tradition and that modifications to Regulation A would suffice for fundraising exemptions. John Reed Stark and Lee Reiners of Duke University called for a full withdrawal. Public Citizen criticized the safe harbor as a “regulatory loophole,” arguing that replacing state law effectively shields bad actors. The Independent Community Bankers Association (ICBA) asserted that any conveniences should not be finalized unless proven to be risk-based, and demanded the inclusion of a sunset clause. Davis Polk, taking a middle ground, stated that “better alternatives exist without needing to start from scratch.”
If you look further at the revision direction:
- Request for relaxed regulation: 44, accounting for 27%
- Call for stricter regulation: 49, accounting for 30%
- Simultaneously require relaxation and tightening: 23, accounting for 14%
- The remaining primary requirements clarify, maintain the original proposal, or are not applicable to this category.
Proponents argue that existing securities regulations are not suitable for all token offerings. The new rules would reduce fundraising costs for startups, provide legal avenues for retail investors to participate, and clarify when tokens can be exempt from securities regulation.
Opponents hold two sharply contrasting views: some believe the new rules remain overly regulatory by bringing decentralized projects under traditional securities frameworks, while others worry that the exemptions are too lenient, weakening investor protections and potentially creating opportunities for fraud and insider selling.
The debate over loosening and tightening centers on four issues.
First, financing limits. The loosening camp seeks to raise the startup financing cap from $5 million and exclude non-financing token distributions such as airdrops and staking rewards; the tightening camp expresses concern that the exemption size is too large.
Second, disclosure requirements. The deregulatory camp emphasizes reducing costs, while the regulatory camp calls for standardized disclosures through the SEC’s EDGAR system, enhanced financial audits, and ongoing reporting. This is the area with the strongest calls for tightening: 83 comments urged stricter rules, compared to only 8 advocating relaxation. Key demands include requiring initial disclosures to be filed via EDGAR and mandating audits for Tier 1 financial reports. Of the 19 comments favoring relaxation, 15 focused on issuer eligibility, with the central issue being whether DAOs without a legal entity can qualify.
Third, insider sales. The new regulations do not mandate lock-up periods, and auditing institutions such as the Center for Audit Quality have proposed additional requirements. The requirements for insider resales have been tightened, advocating for holding periods or lock-up periods.
Fourth, and most controversial, is the safe harbor. Of the 97 comments, 36 called for loosening and 28 for tightening the securities status exit mechanism. Those advocating for relaxation seek to expand the exit conditions to better recognize network functionality and decentralization, while those favoring stricter rules demand independent verification to prevent project teams from permanently exiting securities regulation based solely on their own assertions. Bitwise advocates determining exit based on externally observable facts, whereas Public Citizen and others argue that the exit threshold is too low.
My assessment is that the likelihood of the new regulations being finalized is high, but they will likely require revisions. I estimate it will be only a few months until they are fully implemented.
The reason is that a clear regulatory policy framework for the reform direction has already been established, with the vast majority of substantive feedback focused on how to modify the system rather than reject it outright. However, the SEC must still address investor protection, legal authorization, and potential legal challenges, making the final timeline uncertain.
If implemented, the U.S. crypto industry will gain three major changes: a dedicated legal pathway for token public fundraising through the revival of compliant ICOs; a clear process for projects to exit securities regulation; and a more unified regulatory boundary between federal and state authorities.
The most far-reaching significance of this reform is an attempt to establish a complete regulatory pathway for crypto projects, from fundraising and development to a mature network. For many in the industry, a more easily understood concept is "restarting compliant ICOs."
Regulatory certainty, of course, does not equate to investment safety. The true measure of the new regulations' quality will lie in three pillars: disclosure requirements, insider constraints, and exit conditions for securities classification. The landscape will likely remain mixed, with both highs and lows ahead. But regardless, once this new regulation takes effect, the crypto industry will enter a new era—and my long-anticipated fusion of AI and tokenomics should finally find its rightful place.