SEC Proposes First Permanent Rule for Crypto Offerings: Two Paths of $5 and $75 Million

The U.S. Securities and Exchange Commission (SEC) has introduced its first comprehensive permanent rule proposal for crypto security offerings, titled “Regulation Crypto Assets,” establishing a safe harbor mechanism through two exemption paths of $5 million and $75 million.

The SEC’s announcement on Tuesday, August 18, initiated the process of creating a permanent regulation for digital assets in the U.S. at a time when Congress has failed to pass a comprehensive structural law for the crypto market. The announcement stood out as an unexpected development since the agency had canceled a meeting scheduled for August 14 to discuss the same proposal at the last minute.

The proposal defines two distinct paths for companies to offer crypto securities without triggering certain regulatory obligations. The first path allows early-stage projects to conduct offerings totaling up to $5 million over a four-year period. The second path covers offerings of up to $75 million in any one-year period.

SEC offers two exemptions for crypto offerings

In both exemptions, issuers will be required to provide principle-based disclosures to investors. Companies using the $75 million path will also be required to publish financial statements and be subject to ongoing reporting obligations. Another key element of the proposal is a safe harbor mechanism that would allow certain crypto assets to avoid being classified as an “investment contract.”

SEC Chairman Paul Atkins stated that an issuer could benefit from the protection if they complete the essential managerial efforts undertaken as part of the investment contract or permanently cease those efforts. The SEC will collect feedback on the proposal from the public and the industry for 60 days. Atkins also referred to the Digital Asset Market Clarity Act (CLARITY) efforts in Congress, emphasizing that the legislation is still necessary and a permanent legal framework is needed.