The Securities and Exchange Commission has proposed a new regulatory framework, titled “Regulation Crypto Assets,” designed to establish specific pathways for digital asset fundraising and capital formation. According to official remarks from SEC Chair Paul S. Atkins, the proposal includes two new registration exemptions and a conditional safe harbor aimed at clarifying when a crypto asset is no longer subject to an investment contract.
The framework is intended to provide a more structured environment for crypto networks and applications to grow, according to the SEC. Under the proposal, the SEC would preempt state securities law requirements for the offer and sale of “covered investment contracts” issued through these new regulations.
Startup and Fundraising Exemptions
The proposed rules introduce two distinct tiers for capital raising, tailored to the development stage of a project:
- Startup Exemption: This provides a one-time, non-exclusive exemption for offerings of up to $5 million over a four-year period. It is intended to support early network development, user activity, and functionality.
- Fundraising Exemption: Designed for larger transactions and modeled partly on Regulation A, this allows for offerings of up to $75 million within a 12-month period.
Issuers utilizing the startup exemption must provide principles-based narrative disclosures and file public notices at the beginning and end of the offering period. Those opting for the larger fundraising exemption face stricter requirements, including the provision of financial statements and ongoing reporting obligations. Both tiers remain subject to federal antifraud and antimanipulation provisions.
Investment Contract Safe Harbor
A central component of Regulation Crypto Assets is a conditional safe harbor that allows an issuer to “delink” a crypto asset from its original investment contract. This addresses the long-standing industry question of how a token might evolve from a security into a non-security asset as a network becomes sufficiently functional or decentralized.
The SEC noted that if the conditions of this safe harbor are met, the asset would no longer be deemed subject to an investment contract under the definitions of the Securities Act and the Exchange Act. This mechanism complements a March 2026 joint interpretation between the SEC and the CFTC regarding the evolution of digital assets.
Chair Atkins stated that while the SEC continues to support legislative efforts like the CLARITY Act currently in the Senate, the new framework is intended to provide issuers with a clearer procedural path while allowing innovation to develop in the U.S. The proposal follows a series of regulatory shifts in the federal oversight of digital assets, including recent Federal Reserve proposals regarding limited payment accounts for non-bank firms.
The Commission issued the proposal via a seriatim vote. The impact of the rules will depend on issuer election and the eventual finalization of the framework following the public comment period.
