The U.S. Securities and Exchange Commission proposed Regulation Crypto Assets, known as Reg Crypto, on August 18, establishing a new framework for certain token offerings. According to Galaxy's Alex Thorn, the proposal could provide a regulated route for token issuance in the United States. The framework also introduces a process for ending an investment contract once an issuer completes its promised work.

If adopted, Reg Crypto would allow qualifying issuers to raise up to $5 million over four years, or $20 million or $75 million annually under the larger exemption, depending on the applicable tier. The proposal could also let certain tokens exit investment-contract status after issuers complete required development work and filings. Thorn said fast SEC action could bring the framework into effect before 2027, subject to the comment process and legislation. The effort follows years in which many token issuers have excluded U.S. investors or structured sales offshore amid uncertain securities-law treatment.

Reg Crypto Sets Token Issuance Rules

According to Thorn, Reg Crypto applies to crypto assets that are not securities themselves, provided they were sold through investment contracts involving promised development work. The investment-contract concept stems from the Supreme Court's 1946 SEC v. W.J. Howey Co. decision, under which an investment of money in a common enterprise with profits expected from the efforts of others is a security, a test the SEC has applied to token sales since the 2017 initial-coin-offering boom.

The proposal creates two fundraising exemptions. A startup exemption would allow issuers to raise up to $5 million over four years, while a larger exemption would permit offerings of $20 million or $75 million over 12 months. Those caps and the tiered disclosure structure parallel Regulation A, the existing small-offering exemption, which sets $20 million and $75 million limits across its two 12-month tiers and has already been used for token sales, including Blockstack's 2019 offering, the first token sale qualified by the SEC under that exemption.

Both options require filings and specific disclosures. Tier 2 offerings would additionally require audited financial statements. Issuers would need to provide information on token supply, release schedules, minting, burning, governance, and smart-contract permissions, and would also be required to explain their projects and development progress.

Notably, the proposal would allow some non-accredited investors to participate, with their purchases subject to limits based on annual income or net worth. That contrasts with Regulation D, the exemption many token issuers have used to date, which limits sales to accredited investors.

SEC Creates a Path for Token Exits

Reg Crypto also addresses what happens after an issuer finishes its promised development work. Under the proposal, the related investment contract could cease to exist once required conditions and filings are satisfied. The concept echoes Commissioner Hester Peirce's "token safe harbor" proposals from 2020 and 2021, which sought a three-year grace period for token networks to mature before securities-law obligations attached.

The safe harbor could also cover tokens issued years ago without using the new fundraising exemptions. Thorn said this could help address assets whose securities-law status remains unresolved.

The SEC estimates that roughly 475 issuers could use the safe harbor annually, while approximately 130 offerings could rely on the two fundraising exemptions. Meanwhile, covered tokens could become immediately transferable under the proposal, and the framework would preempt certain state registration requirements.

SEC Proposal Faces Comments and Timing

The proposal does not cover exchanges, brokers, dealers, custody, or tokenized securities. Comments are due 60 days after publication in the Federal Register.

The SEC canceled its August 14 open meeting before releasing Reg Crypto four days later. Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda issued supportive statements.

Thorn said adoption before 2027 would require a fast timetable, and noted that Congress could still affect the framework through future legislation. Congress is separately debating digital-asset market-structure legislation after the House passed the CLARITY Act in July 2025, and how a final Reg Crypto rule would fit with any resulting statute remains an open question.