SEC Proposes Exemptions from Registration and a Safe Harbor for Crypto Assets

The Securities and Exchange Commission (SEC) has suggested new rules designed to make it clearer how the federal securities laws are to be applied to crypto assets while at the same time lowering the regulatory hurdles for companies that are operating in the market.

Journal of Accountancy reports that the regulation on crypto assets, which was announced on Tuesday, includes two exemptions from the requirements of securities act registration in the case of certain investment contracts involving crypto assets. One of these exemptions would allow offerings of up to $5 million over a four-year period, and the other would permit offerings of up to $75 million each year.

Those companies which relied on either of the exemptions would have to make available to investors certain narrative disclosures based on general principles, and those organizations taking advantage of the broader exemption would also be required to produce financial statements and meet the continuous reporting requirements.

The proposal would also establish a conditional safe harbor relating to situations in which a crypto asset would not be regarded as falling within the definition of "security" under the Securities Act of 1933 and the Securities Exchange Act of 1934. Furthermore, the rules would preempt some state securities registration and qualification requirements in the case of qualifying offerings and transactions on the secondary market.

“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,” said SEC Chair Paul Atkins.

SEC Commissioner Hester Peirce stressed that the framework is still open to revision, pointing out that the proposed exemptions and safe harbor "will not fit every model."

The SEC will accept comments from the public for a period of 60 days after the proposal is published in the Federal Register.

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