Reg Crypto Framework Offers Tokens a Lifeline Out of Investment Contract Status
The SEC's proposed Reg Crypto framework could provide hundreds of existing tokens with a formal route out of investment contract status, according to Galaxy Research. This framework would allow issuers to file a transition report and certify that they have met certain conditions, effectively terminating the related investment contract under the Securities Act and the Securities Exchange Act.
The safe harbor proposed in Reg Crypto would apply to digital assets that are not themselves securities but were issued or sold as part of an investment contract. This means that tokens issued years ago could use this route to resolve their uncertain legal status, rather than waiting for a fresh wave of public token sales.
Galaxy Research notes that the expected workload for preparing a standalone transition report is around 30 burden hours, including work performed by outside professional service providers. This suggests that most issuers would likely need legal or compliance support to complete the process.