Galaxy says Reg Crypto could end token legal ambiguity

Galaxy Research has said the SEC’s proposed Reg Crypto framework could give hundreds of existing tokens a formal route out of investment contract status.

Galaxy Research, in an Aug. 21 analysis, said the proposal could replace years of uncertainty over when an investment contract tied to a token ends with a filing and a recorded date.

Alex Thorn, Galaxy’s head of firmwide research, said the first visible effect could be the resolution of securities-law questions surrounding tokens already in circulation, rather than a fresh wave of public token sales.

The SEC estimated that about 475 issuers would file transition reports under the investment contract safe harbor each year. By comparison, the agency expects approximately 130 annual offerings across the proposal’s two new fundraising exemptions.

According to Galaxy, the difference suggests that existing projects may have more immediate use for the exit process than new issuers have for the fundraising routes.

“Reg Crypto could provide meaningful regulatory clarity, but only Congress can make that clarity durable,” Thorn said.

Reg Crypto could give legacy tokens a formal exit

Under the proposal, the safe harbor would apply to a crypto asset that is not itself a security but was issued or sold as part of an investment contract. The framework would not cover tokenized stocks, bonds, or arrangements combining tokens with equity or another security.