SEC Proposes Crypto Offering Framework with Tailored Exemptions
The Securities and Exchange Commission (SEC) has proposed a new framework for regulating cryptocurrency offerings. The proposal, titled 'Regulation Crypto Assets,' would create tailored exemptions from Securities Act registration for certain crypto-related transactions.
Chairman Paul Atkins has criticized the SEC's past approach to crypto matters as 'regulation by enforcement' and an attempt to fit a 'square peg in a round hole.' The proposed rules reflect an acknowledgment that the existing securities offering framework was not well suited to the distinctive features of crypto transactions.
The proposal would create two new registration exemptions for offerings of covered investment contracts involving crypto assets: a one-time exemption for offerings of up to $5 million over four years, and an exemption permitting offerings of up to $75 million during any rolling 12-month period. Both would require principles-based narrative disclosures.
The proposal also includes a conditional safe harbor from the term 'investment contract' in the definitions of 'security' in the securities laws. This safe harbor could apply once an issuer has completed or permanently ceased the essential managerial efforts it represented or promised to undertake.