The U.S. SEC proposes Reg Crypto: establishing a legal pathway for public offerings of certain tokens and the exit of investment contracts
The head of Galaxy Research posted on platform X stating that the U.S. Securities and Exchange Commission has proposed the Regulation Crypto Assets, abbreviated as Reg Crypto. This proposal aims to establish a legal pathway for the issuance of certain tokens to the U.S. public and to set up a mechanism for terminating investment contracts. The scope is limited to crypto assets that are not themselves securities but have been issued or sold as part of an investment contract; tokenized stocks, bonds, and arrangements that bundle tokens with equity or other securities are not included in the framework.The proposal sets four stages: financing, disclosure, construction, and exit. A one-time startup exemption allows issuers to raise up to $5 million over a maximum of four years; a higher exemption limit set by Regulation A allows for raising $20 million or $75 million within 12 months.Related financing must undergo qualification review by the U.S. Securities and Exchange Commission and continuous disclosure, with the investment cap for unaccredited investors being the greater of 10% of their annual income or net worth. Issuers must also disclose the token supply and release plan, minting and burning mechanisms, governance and smart contract permissions, source code, as well as project construction commitments and progress.When the issuer completes or permanently ceases relevant construction obligations, makes no new construction commitments, and submits a transition report, the related investment contracts will be deemed terminated, and the crypto assets will no longer be subject to securities laws under that investment contract. Issuers that do not use the above financing exemptions can also utilize this safe harbor. The U.S. Securities and Exchange Commission estimates that approximately 475 issuers will use the investment contract safe harbor each year, with about 130 issuers utilizing the two new exemptions. Qualified issuances may not be considered restricted securities and can be resold immediately without contractual restrictions.The proposal will also exclude initial offerings and certain secondary transactions within its scope from state registration and qualification requirements, but it does not involve exchanges, brokers, dealers, custodians, nor is it an independent innovation exemption for tokenized securities and on-chain transactions. The comment period is 60 days after publication in the Federal Register. U.S. Securities and Exchange Commission Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda have all issued supportive statements.
