SEC proposal aims to clarify securities rules for crypto assets

The SEC is seeking feedback on a proposal that aims to ease barriers to participation in the crypto assets market.

New “Regulation Crypto Assets” rules proposed Tuesday would “address long-standing barriers to responsible capital formation and innovation within domestic crypto asset markets,” according to a news release.

“Congress designed our securities laws to amplify — within specific guardrails — opportunities for entrepreneurs to innovate and build new products,” SEC Chair Paul Atkins said in the release. “Advancing this regulatory framework is a key element in our strategy to advance the rule books for the modern era and another step by the commission to onshore innovation in crypto asset markets for generations to come.”

According to the release, the proposal includes two exemptions from the registration requirements of the Securities Act of 1933 specifically tailored to certain investment contracts involving crypto assets — a one-time exemption that would permit offerings of up to $5 million during a four-year period and an exemption permitting offerings of up to $75 million during each 12-month period. Under both exemptions, issuers would be required to make certain principles-based narrative disclosures available to their investors. In addition, issuers under the second exemption would be required to provide financial statements and be subject to ongoing reporting requirements.

The proposed rules also include a conditional safe harbor from the term “investment contract” in the definitions of “security” in the Securities Act of 1933 and the Securities Exchange Act of 1934. If the conditions of that proposed safe harbor are satisfied, then a crypto asset would be deemed not to be subject to an investment contract for purposes of those definitions of “security.” In addition, the proposed rules would preempt state securities law registration and qualification requirements with respect to offers and sales of securities issued pursuant to an exemption in Regulation Crypto Assets, as well as certain secondary-market transactions. 

The public comment period will remain open for 60 days following publication in the Federal Register.

“The exemptions and safe harbor we are proposing today will not fit every model, and we want to hear your feedback,” SEC Commissioner Hester Peirce said in a statement. “This proposal is one step on a long road toward a clear, sensible, enforceable regulatory framework for crypto.”

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.