SEC Proposes Rule to Clarify Cryptocurrency Regulations
The US Securities and Exchange Commission (SEC) has published its proposed rule, Regulation Crypto Assets, in the Federal Register on August 21, 2026. The proposal aims to provide clarity on when a token stops being considered an investment contract under the Howey test. This has been a long-standing issue for crypto assets, with the SEC having handled cases individually and struggled to apply the test.
The proposed safe harbor in Rule 400 requires two conditions to be met: the issuer must have completed or permanently ceased all essential entrepreneurial efforts, and they must file a transition report on Form TR. If these conditions are met, the investment contract is deemed ended, and the token is no longer considered a security.
The proposal also includes two exemptions from registration for issuers: a startup exemption permitting up to $5 million in issuances within four years, and a fundraising exemption allowing up to $75 million per 12-month period. These exemptions would permit issuers to raise money without registering under Section 5 of the Securities Act.