SEC Proposes Crypto Fundraising Exemptions in Abrupt About-Face

In brief

• The SEC proposed exemptions allowing crypto projects to raise up to $5 million over four years or $75 million annually without full securities registration.
• The proposal includes a safe harbor that could allow a crypto asset to separate from the investment contract through which it was sold.
• The SEC moved forward with the proposal days after canceling a meeting on the framework amid reported pressure from Wall Street and the White House.

The Securities and Exchange Commission proposed new rules Tuesday that would let crypto projects raise funds without requiring full securities registration, abruptly changing course after calling off a meeting late last week in which the Commission was expected to introduce the measures.

Under “Regulation Crypto Assets,” a startup exemption would allow digital token offerings of up to $5 million over four years. A second exemption would allow token issuers to raise up to $75 million every 12 months if they provide financial statements and ongoing reports.

Both would require disclosures, while federal antifraud and antimanipulation rules would still apply.

The measures come at an opportune time for the cryptocurrency industry after a setback in negotiations over the Clarity Act sunk hopes that the marquee market-structure legislation would be passed this year. The Clarity Act would, if passed, formally legalize most crypto activity in the United States, but SEC Chair Paul Atkins had previously signaled in late July that the Commission was prepared to step in with its own rules if the bill fell short.