Original | Odaily Planet Daily (@OdailyChina)
Author | jk
The U.S. Securities and Exchange Commission (SEC) officially released a new rule proposal titled "Regulation Crypto Assets" on North American local time, August 18, establishing a "tailored" issuance framework for investment contracts involving crypto assets. This is the most substantial practical step taken by SEC Chairman Paul Atkins in the field of crypto regulation since taking office, and is also a key signal of the regulatory agency proactively charting a new path amid the ongoing stagnation of the Congressional "CLARITY Act."
What is the New Rule: Two Exemptions, Altcoins Can Start Running Forward
According to the SEC's official release, the core content of "Regulation Crypto Assets" includes two exemptions from Section 5 registration requirements of the Securities Act of 1933, and one conditional safe harbor rule.
1. Startup Exemption
Allows early-stage projects to raise a cumulative total of no more than $5 million over a maximum period of four years without completing the full registration process. Issuers only need to provide principle-based narrative disclosures, a process that is relatively simplified and closer to a notice-based filing.
2. Fundraising Exemption
Allows issuers to raise no more than $75 million in any 12-month period. This exemption mechanism largely mirrors the existing Regulation A+ framework, divided into two tiers. Issuers are required to submit audited financial statements in addition to narrative disclosures and assume ongoing reporting obligations. Issuers under both exemptions are not exempt from the anti-fraud and anti-manipulation provisions of federal securities laws.
In other words, if an issuer needs to raise funds by issuing tokens, then based on the scale of financing, they can choose to apply one of the two exemptions mentioned above, instead of going through the traditional, time-consuming, and costly full SEC registration process:
- For small-scale early-stage financing (no more than $5 million total over 4 years): For example, a nascent project wants to sell tokens on a small scale to kickstart development, it can use the Startup Exemption, only needing to clearly describe the project situation in plain language (narrative disclosures), without requiring audited financial reports. The process is simple, closer to filing rather than approval.
- For larger-scale financing (up to $75 million annually): For example, a project with some foundation wants to raise funds from a broader public, it must use the Fundraising Exemption. In addition to also making narrative disclosures, it must additionally submit audited financial statements, and after receiving funds, must continuously report to the SEC (similar to periodic disclosure obligations of listed companies).
If registering according to such rules, the issuance of U.S. altcoins is completely legal.
Excerpt from SEC Official Website. Source: SEC
3. Investment Contract Safe Harbor
Under this safe harbor provision, once an issuer has completed or permanently ceased its previously promised "essential managerial efforts" that investors were led to expect, the relevant crypto asset will be deemed no longer subject to the "investment contract" classification, meaning the asset can "shed" its security attributes.
Additionally, the proposal includes a redefinition of "qualified purchaser," which means that securities issued under the exemptions of "Regulation Crypto Assets," as well as related secondary market transactions, will be exempt from the registration and qualification review requirements of state securities laws (i.e., federal preemption of state laws).
In other words, if a token was initially sold as an "investment contract" (e.g., the project team promised "we will work hard to develop, maintain, and operate this network, and the token will have value in the future"), then over time, as long as specific conditions are met, this token can cease to be regulated as a security:
The trigger condition is that the project team has done what it promised, or has stopped doing it. Either the team has completed the promised "essential managerial efforts" (e.g., the network is already built, decentralization is sufficient, no longer reliant on a specific team for maintenance); or the team has permanently ceased to continue fulfilling these promises (e.g., team disbanded, project abandoned). In summary, as long as investors can no longer reasonably expect the project team to continue "working" for the token's value, this token can escape the constraints of an investment contract and no longer be classified as a security.
Excerpt from Official Website, Source: SEC
Once the conditions are met, the buying, selling, and transfer of this token will no longer be treated as securities transactions, thus no longer requiring securities registration or being subject to lock-up rules, and exchanges can list and trade it more freely.
When a token is first issued, because the project team promises "I will work hard to make it valuable," it is regulated as a security; but after the team fulfills its promise (or gives up entirely), the token can become an ordinary asset not subject to securities laws.
This means that all tokens whose development teams have abandoned them can be treated as non-securities, not subject to SEC regulation, with large transactions not requiring reporting, removing all regulatory barriers.
It is worth noting that the SEC specifically defines the new term "covered investment contract" in the proposal document, limiting it to:
(1) involving a crypto asset;
(2) where the crypto asset itself is not a security;
(3) where the investment contract does not involve any asset other than that crypto asset (whether security or non-security asset).
This strict scope definition dictates that the two exemptions and the safe harbor only apply to narrow crypto asset issuance scenarios, and not to issuances involving "security-type" or "digital securities" (tokenized securities).
The Reason for Releasing This Bill: The Clarity Act is Almost Dead
"Regulation Crypto Assets" is a continuation and culmination of a series of policy actions by the SEC over the past year and a half:
- January 2025: Trump signs the executive order "Strengthening American Leadership in Digital Financial Technology," establishing the "President's Working Group on Digital Asset Markets."
- Early 2025: SEC establishes the Crypto Task Force, led by Commissioner Hester Peirce, solicits public comments, receiving over 300 comment letters.
- July 2025: The President's Working Group releases a report, explicitly recommending that the SEC should use its rulemaking and exemptive authority to establish a tailored registration exemption mechanism, a time-limited safe harbor, and an exemption arrangement for "airdrops" for securities offerings involving digital assets. Atkins subsequently announces the launch of "Project Crypto."
- March 17, 2026: SEC and CFTC jointly release the "2026 Interpretive Guidance," systematically categorizing crypto assets into five categories for the first time—digital commodities, digital collectibles, digital instruments, stablecoins, and digital securities—and clarifying the standards under which non-security crypto assets may "fall into" or "escape from" the investment contract classification. This guidance serves as the direct theoretical basis for the "Regulation Crypto Assets" proposal.
- August 18, 2026: "Regulation Crypto Assets" is officially released as a rule proposal, entering a 60-day public comment period.
The SEC frankly admits in the proposal that its past regulatory approach to crypto assets relied mainly on the Howey test established by the Supreme Court in 1946. This "shoehorning" approach had two major flaws: first, the Howey test itself is difficult to apply to novel assets like crypto assets whose rights attributes evolve over time; second, the content required to be disclosed by current disclosure rules (such as Regulation S-K and Form 1-A) often diverges from the information crypto asset investors genuinely care about (such as tokenomics, network governance mechanisms, source code security, etc.). This is also why Rule 103, "Principle-Based Disclosure Requirements," is a key design focus in this proposal.
More critically, the SEC's choice to act proactively at this juncture is directly related to the severely stalled congressional legislative process. The "CLARITY Act," originally seen as the "ultimate solution" for the crypto industry, has repeatedly stalled in the Senate this year: from disagreements between the crypto industry and the banking sector over stablecoin reward clauses, to ethical controversies surrounding Trump's personal crypto asset interests, the bill has consistently failed to garner enough votes in the Senate.
The contract price on Polymarket for "the CLARITY Act will be signed into law within 2026" has also dropped from a peak of nearly 82% in February to the 18%-21% range in mid-August. Although the Senate Majority Leader submitted a cloture motion on August 8, setting September 15 as the date for a procedural vote, this vote requires 60 supporting votes. Given the current Republican seat count, they still need to win over about 10 Democratic senators, which is quite challenging.
It is precisely against this backdrop of stalled legislation and sustained pressure from the market and industry that White House crypto policy advisor Patrick Witt bluntly stated at the SALT Conference that the administration "is giving the Senate and Congress ample opportunity," but "will not wait forever." If the legislative window fails in September, regulatory agencies will proceed with rulemaking on their own. "Regulation Crypto Assets" is the concrete manifestation of this statement. The SEC chose to utilize its existing rulemaking and exemptive authority to provide the crypto industry with an interim regulatory framework while congressional legislation hangs in the balance, rather than waiting for a bill that could fail at any moment.
Timeline: When Will It Become a Formal Rule?
"Regulation Crypto Assets" is currently still in the proposal stage and has not taken effect. Key subsequent milestones are as follows:
- August 18, 2026: SEC officially releases the proposal, docket number S7-2026-27.
- Within 60 days of release: Public comment consultation period opens. Anyone can submit comments via the SEC website or email. The deadline will be determined after the proposal is officially published in the Federal Register.
- After the comment period ends: The SEC needs to review and respond to all substantive comments before deciding whether, and in what modified form, to formally adopt the final rule ("adopting release"). This process has no statutory time limit. Historically, similar rules have taken several months to over a year from proposal to finalization.
- November 2026: Hester Peirce plans to leave the SEC, which may impact the internal momentum for the framework's subsequent advancement.
Overall, for "Regulation Crypto Assets" to ultimately take effect, it must still undergo the full process of comment solicitation, modification, and formal adoption, which is not expected to be completed in the short term (within a few months). The parallel legislative process for the "CLARITY Act" is equally uncertain. For the crypto industry, this means that for the foreseeable future, the regulatory environment for crypto asset issuance in the U.S. will remain in a transitional state of "the proposal and legislation racing, outcome undetermined."
