SEC Proposes New Regulatory Framework for Crypto Assets

Without waiting for Congress. In a particularly offensive speech, Paul Atkins presented Regulation Crypto Assets, a new framework for fundraising in cryptocurrencies. The president of the American regulator evokes “the most historic step” ever taken by the SEC to modernize its rules and bring innovation back to the United States. Still at the proposal stage, the text must now be subject to public consultation 60 days after its publication in the Federal Register. Here are the three essential points to remember.

1. Two new paths to raise up to $75 million in crypto

The first measure directly concerns the financing of crypto projects. The SEC is proposing two exemptions allowing certain tokens associated with an investment contract to be sold without going through the full registration procedure provided for traditional financial securities.

The first, designed for young projects, would authorize a maximum raising of $5 million over four years. The second would raise up to $75 million over a period of twelve months.

In both cases, issuers should provide investors with information about the project, its operation and the associated risks. The $75 million plan would also require regular financial statements and reporting. Federal laws against fraud and manipulation would remain in full force.

The stated objective consists of answering a question that has plagued the sector for years: how to finance the development of a blockchain network without having to immediately apply to your token all the rules designed for traditional actions?

2. A token could leave the field of financial securities

The second change concerns the legal status of the tokens. The SEC offers a safe harbor, that is to say a protection regime allowing, under certain conditions, to dissociate a cryptoasset from the investment contract used to finance its development.

A token could thus be initially sold as part of a transaction subject to securities laws, without remaining under the authority of the SEC indefinitely. To benefit from this exit, the issuer should have completed or definitively abandoned the essential interventions promised to investors.

In other words, the functioning and value of the project should no longer depend mainly on the work expected of the founding team. This would have to certify it with the SEC and comply with several additional conditions.

The regulator thus establishes a distinction between the token and the way in which it was sold: it is the investment contract surrounding the operation which can constitute a financial security, and not necessarily the cryptoasset itself.

3. The SEC moves forward without waiting for the CLARITY Act

Paul Atkins assures that he continues to support the CLARITY Act and expects to see the text arrive on the president's desk. But his message is unambiguous: the SEC will use the powers it already has in the meantime.

This proposal therefore marks a major change in method. After years of “regulation through the application of the law”, the regulator wants to establish thresholds, reporting obligations and criteria that can be used by companies upstream.