SEC New Proposed Rules on Crypto Assets

[cryptoaddictchie]

The SEC finally did release a news about new crypto rules on regulations of crypto assets framework.

TODAY: The SEC proposed new rules, “Regulation Crypto Assets,” that would create a clear and fit-for-purpose framework for certain investment contracts involving crypto assets.

In regards to the new proposal. Heres a summation of a 402 pages doc from the new framework for crypto assets.

The proposed rules would be set forth in a new regulation titled “Regulation Crypto Assets” and
would include two exemptions from the registration requirements of section 5 of the Securities
Act of 1933. The first exemption would permit offerings of up to $5 million during a four-year
period. The second exemption would permit offerings of up to $75 million during each 12-month
period. Under both exemptions, issuers would be required to make certain principles-based
narrative disclosures available to their investors. In addition, issuers under the second exemption
would be required to provide financial statements and would be subject to ongoing reporting
requirements. Issuers that rely on these exemptions would remain subject to the antifraud and
antimanipulation provisions of the Federal securities laws. The proposed rules also would
include a conditional safe harbor from the term “investment contract” in the definitions of
“security” in the Securities Act of 1933 and the Securities Exchange Act of 1934. If the 2
conditions of that proposed safe harbor are satisfied, then a crypto asset would be deemed not to
be subject to an investment contract for purposes of those definitions of “security.”

Based on this new framework, they are proposing a two options for anyone who wants to issued a crypto asset.

1. Up to $5 million over 4 years with a smaller project exemption.
2. Up to $75 million per 12 months with a much larger fundraising exemption.

Obviously its still the same with the previous ICO patterned but with a tight monitoring since the second option involveds a lot of requirements and financial statements to be submitted and continously update by any issuers. Well considering a $75million raised funds Id say its a must.

Well Im just wondering how they used the term Safe Harbor when the conditions have been met? I mean does SEC ready to govern a wide scale release of different utilities and crypto startup? Like what kind of concept will pass? Or if a tech type of project like a noncustodial bitcoin type rises? Without any involving any mode of sales? Though I didnt scanned yet if theres a part discussion about it but its also a must discuss topic too.

[d5000]

Well Im just wondering how they used the term Safe Harbor when the conditions have been met? I mean does SEC ready to govern a wide scale release of different utilities and crypto startup? Like what kind of concept will pass? Or if a tech type of project like a noncustodial bitcoin type rises? Without any involving any mode of sales? Though I didnt scanned yet if theres a part discussion about it but its also a must discuss topic too.

This is explained in the document in a proposed "Rule 400", to achieve more safety for project to be "protected" from legal action regarding the Howey Test. It covers a very specific situation:

Rule 400(a) would require that the issuer of the covered investment contract has completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in under the covered investment contract and is not making and does not intend to make any new representations or promises to engage in essential managerial efforts with respect to the crypto asset.

Source: https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf, p. 164

My interpretation, which may be wrong, is the following: If you organize an ICO, and in the ICO you have promised a roadmap, when this roadmap is finished, then nobody can sue you to continue with "managerial effort".

For me that means that you will not be responsible for a once-issued token for eternity, but only until you have done everything your promised.

There is also a clarifying part that this is not the only reason why a token may be exempt from the security regulation. For example, earlier they made the so called "Interpretation 2026", which covers the case already described in this "Rule 400", but also another one where it says:

(2) the purchaser would not reasonably expect the issuer to be able to fulfill or to continue to engage in the essential managerial efforts it represented or promised it would undertake.

Source: https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf, p. 165

And that is maybe a better fit for ICOs where nothing was promised and so nothing can reasonably be expected because the crypto asset issuers do have no control over the asset (like it would be the case if they issued a "second bitcoin").

[cryptoaddictchie]

This is explained in the document in a proposed "Rule 400", to achieve more safety for project to be "protected" from legal action regarding the Howey Test. It covers a very specific situation

I see so the safe harbor means for the "Issuer" I actually intepreting it as a safe zone for users instead cause before many users were indeed in the loss side when it comes to investment for new tokens and wondering if they got some assurance with it. But ofcoursr in the rule of investing theres always a loss unexpectedly but not to the reason that issuer has conducted a scammy approach.

Thanks btw! Wow thats on the middle part of the 402 page doc. Curious if you read it all? Cause thats a lot. Actually looking for a broad summarize of this from a users feedback but it will probably a long note.