Author:Byron Gilliam
Compiled by: Deep Tide TechFlow
Deep Tide's Guide: The U.S. Securities and Exchange Commission has finally released its proposal for cryptocurrency asset regulation. The full text is a lengthy 402 pages, but the core principle isn't complicated: let the project teams tell the full story and lay out the risks clearly, then leave the rest to the investors' own judgment. For crypto entrepreneurs, this might represent the first clear path to legally selling tokens for fundraising in the U.S.; for investors, information disclosure standards will become an important tool for screening projects.
The "Crypto Asset Regulation" is finally here. All 402 pages.
Fortunately, there's no need to read it all.
The summary states: "The proposed offering regime is designed to facilitate capital formation and accommodate innovation in the crypto asset markets, while ensuring investors are adequately protected and provided with the information necessary to make informed investment decisions."
To "accommodate innovation," the SEC proposed two exemptions that would allow new crypto projects to issue tokens to users and investors without violating securities laws.
This will be the most watched part: crypto founders will finally be able to raise funds by selling tokens. And in the U.S.!
To ensure U.S. investors are "adequately protected," the SEC proposed that anti-fraud laws continue to apply, regardless of any exemption, and that "bad actors" would be disqualified.
This is somewhat stating the obvious: an exemption from securities laws does not equal an exemption from other laws. Fraud is still fraud.
To provide investors with the "information necessary to make informed investment decisions," the SEC proposed that issuers relying on either exemption must make publicly available "principles-based narrative disclosures."
This is essentially the SEC's entire job: ensure investors are fully informed, and then (most of the time) step aside.
Or, at least, it's what its job was supposed to be.
Below is part of the message President Franklin D. Roosevelt sent to Congress in 1933 as its members debated how the federal government should regulate securities:
Of course, the federal government cannot and should not take any action which might be construed as approving or guaranteeing that newly issued securities are sound in the sense that their value will be maintained or that the properties they represent will earn profit.
There is, however, an obligation upon us to insist that every issue of new securities to be sold in interstate commerce shall be accompanied by full publicity and information, and that no essentially important element attending the issue shall be concealed from the buying public.
This proposal adds to the ancient rule of caveat emptor, the further doctrine “let the seller also beware.” It puts the burden of telling the whole truth on the seller. It should give impetus to honest dealing in securities and thereby bring back public confidence.
The purpose of the legislation I suggest is to protect the public with the least possible interference to honest business.
In short, Roosevelt told Congress the SEC should be built on the principle of "disclosure regulation": it should protect investors primarily by ensuring they have the information they need to make intelligent decisions.
This, however, was not the only approach at the time. Most U.S. states at the time did the opposite: "merit regulation"—that is, regulators judged securities based on their perceived merits as investments.
In Texas and Wisconsin, for example, regulators could—and often did—block proposed securities offerings because they thought the securities were overpriced or otherwise unfair to investors.
The SEC, by contrast, would judge proposed offerings based solely on the quality and completeness of their disclosures.
This light-touch approach was inspired by the legal scholar Louis Brandeis. Writing in 1914, he argued securities should be regulated like food. The Federal Pure Food Law, he explained, doesn’t guarantee quality or price; it allows consumers to judge quality for themselves by requiring disclosure of ingredients.
The same, he argued, should apply to securities, provided the information is easily accessible:
>To be effective, knowledge of the facts must be actually brought home to investors, and the best way to do that which has as yet occurred to anybody is to require the facts to be stated in every notice, circular, letter and advertisement inviting investors to purchase. Compliance with that requirement should also be obligatory, and not something that the investor could waive."Sunlight is said to be the best of disinfectants," he added, "electric light the most efficient policeman."
When the SEC was established two decades later, its first chairman, Joseph Kennedy, explained it would follow Brandeis' lead:
Gentlemen, now, the Securities Act does not make the Government a judge of values. It gives no advice; it expresses no approval. You may ask: what does it do? It sets up a department to which persons responsible for corporations must submit the information called for by required questions and file that information in the department. Before anyone can ask you to invest in any enterprise, there must be on file in Washington a record of essential facts which will guide your judgment.
Yet the SEC has not always hewed to its founding principle.
In a 2024 speech, SEC Commissioner Hester Peirce accused the agency of straying from its original disclosure-based mandate:
Yet, since the turn of the century, as we have expanded our rule book at a record pace, the Commission’s regulatory approach has become increasingly prescriptive. Some of that prescriptiveness is from the statute, but a lot of it is the result of Commission discretion. Public companies face an ever-lengthening list of disclosure mandates. Some mandatory disclosures seem intended to alter how a company operates, not elicit material disclosure.
She added, "Congress did not design the SEC as a merit regulator," and concluded by urging the agency to return to its original disclosure-focused mandate.
Now, it is returning.
"Crypto Asset Regulation" represents a return to the SEC's founding principle: disclosure enables investors to assess risk for themselves.
Setting the Standard
The SEC's proposal requires crypto projects selling tokens under an exemption to make disclosures, but does not mandate how the disclosure should be accomplished.
It's unclear whether the final rule will contain rules on how to disclose. The SEC might choose to recognize standards developed by an industry group, as it has with accounting and compliance rules.
Either way, though, the Commission has an evolving industry effort to draw from: Blockworks' Token Transparency Framework (TTF)—the first open-source disclosure standard for digital assets.
Since launching in June 2025, 75 protocols have voluntarily submitted standardized disclosure documents to the TTF.
TTF's "B-1" is a one-time filing, submitted around the time a token first begins trading, just as a company files an S-1 ahead of an IPO.
(The photo above is of Bob Woodward and Carl Bernstein looking at some B-1s.)
The B-2, then, is a filing submitted to keep information current, just as a company files a 10-K.
(I guess "B-K" sounded too much like a hamburger code?)
69 industry participants—exchanges, custodians, and asset managers—have joined the Transparent Alliance. The group works with Blockworks to develop common disclosure standards for digital assets.
Perhaps more importantly, these participants collectively represent over $400 billion in market cap. They have made TTF filings a core input into their due diligence processes.
For asset managers, the filings are just a starting point for their investment process. They still need to do their own research (as the saying goes).
As Blockworks explains: "Each filing assesses completeness, not quality."
FDR would say that's all we really need.
