SEC Tees Up New Crypto Regulations as Clarity Act Continues to Languish

The last provision could prove critical. It would establish when developers have completed or permanently ceased the managerial efforts promised to purchasers, potentially allowing the associated crypto asset to trade without continuing securities-law restrictions.

That amounts to a regulatory off-ramp for projects that begin with centralized developers raising money to build a network but eventually become sufficiently independent of those developers. Rather than permanently classifying a token based on the circumstances surrounding its initial sale, the framework would recognize that its regulatory status can change as the project develops.

Decrypt described the mechanism as an “escape hatch” from securities registration, with relief becoming available after control passes out of the builders’ hands.

But the shift to rulemaking could be just as important as the substance.

Staff statements and interpretive guidance can provide market participants with indications of an agency’s enforcement position but generally lack the legal force and durability of regulations adopted through formal rulemaking. By putting Regulation Crypto through notice and comment, the SEC would begin embedding the Atkins-era approach into the agency’s regulatory architecture.

The initiative also comes as Congress has again failed to complete legislation establishing a comprehensive digital-asset market structure.

The Senate left Washington for its August recess without voting on the Clarity Act, despite months of negotiations over legislation intended to establish clearer divisions of regulatory authority over digital assets. Senate Majority Leader John Thune has filed a cloture motion setting up a potential procedural vote Sept. 15, but the compressed election-year calendar has increased uncertainty over whether Congress can complete the legislation this year.

The SEC is effectively moving into that vacuum.

In comments in late July, Atkins acknowledged that Congress ultimately must establish a durable statutory framework for digital assets, and Regulation Crypto cannot resolve all of the jurisdictional issues addressed by the Clarity Act. But the SEC can use its existing authority under federal securities laws to establish exemptions governing crypto fundraising.

That creates two parallel tracks for crypto regulation. As Congress continues trying to determine the long-term division of authority among federal regulators, the SEC is using its existing powers to give crypto developers clearer rules immediately.

Friday’s meeting could therefore signal something larger than another crypto exemption. It could mark the point at which the SEC begins converting its retreat from regulation by enforcement into a formal regulatory regime of its own.