SEC Proposes Regulation Crypto Assets to Allow Up to $75 Million Fundraising and Define an End Point for Token Securities

The U.S. Securities and Exchange Commission (SEC) has published a proposed rule, Regulation Crypto Assets, that would create a federal framework for crypto projects to raise capital and later terminate the securities relationship tied to their tokens.

Key Features of the Proposal

The rule introduces three fundraising pathways, each with specific limits, eligibility criteria, and reporting requirements:

• Startup exemption: up to $5 million over a period of up to four years; no audited financial statements required; public disclosures on the project’s website.
• Fundraising Tier 1: up to $20 million in a 12‑month period; requires a U.S. entity, unaudited financial statements, and periodic reports (annual, semi‑annual, current).
• Fundraising Tier 2: up to $75 million in a 12‑month period; similar to Tier 1 but mandates audited financial statements.

Retail Investor Protections

For both Tier 1 and Tier 2 offerings, non‑accredited investors may invest up to 10 % of their annual income or net worth, whichever is higher. There is no rule‑based resale lock‑up, allowing investors to sell their holdings freely.

Ongoing Disclosure Requirements

Issuers would file a new Form 1‑CRYPTO on EDGAR, detailing the token’s supply, allocation, governance, development roadmap, and financial status. Additional reporting forms would keep information current:

• Form 1‑KC – annual report within 120 days of fiscal year‑end.
• Form 1‑SC – semi‑annual report within 90 days.
• Form 1‑UC – current report for material events within four business days.

Ending the Investment Contract (Rule 400)

When the issuer completes the promised development work or permanently ceases it, the securities relationship can be terminated by filing Form TR. The filing must certify that no further managerial promises are being made and provide an analysis sufficient for a reasonable investor to understand the termination.

Regulatory Timeline

The proposal was entered into the Federal Register on August 21. Comments are due by October 20, after which the SEC will review the feedback and vote on a final rule before any project can rely on the new exemptions.