Statement on Regulation Crypto Assets

Today, the Commission proposes Regulation Crypto Assets, which would create a specific offering framework for certain investment contracts involving crypto assets, referred to as "covered investment contracts."[1] In so doing, the proposal would provide rules that crypto entrepreneurs and market participants can rely on.

Two new exemptions from registration under the Securities Act would be created for offerings of covered investment contracts: a "startup exemption" for up to $5 million over a four-year period, and a "fundraising exemption" permitting up to $75 million during each 12-month period. In addition, a conditional safe harbor from the definition of "investment contract" under the Securities Act and the Securities Exchange Act would be available once an issuer has completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in under the covered investment contract.

These provisions are intended to give issuers a workable path to raise capital, reduce the incentive to move offshore, and provide U.S. investors more opportunities to invest with clearer, more consistent protections.

Regulators have an ongoing obligation to consider how existing laws and rules apply to new technologies, products, services, and forms of securities. The Commission's approach to crypto in recent years-advancing untested legal theories through enforcement actions rather than rulemaking-deprived the public and market participants of the opportunity to have input into the development of workable rules. Instead, interested persons were left to speculate how the facts of one enforcement case might apply to their own situation.[2] Starting on January 20, 2025, the Commission moved away from regulation by enforcement and started doing what it should have been doing all along: listening to the public. The Crypto Task Force was formed in part to commence an open dialogue on how crypto assets should be regulated if they constituted securities.

The historical treatment of crypto by the Commission is regrettable. Even when a crypto asset was properly treated as a security, prospective issuers were provided no realistic way to comply with the Commission's registration process. Persons who sought to register their crypto offerings were often given a bureaucratic runaround with no resolution in sight. Those who tried to engage with the Commission in good faith found themselves facing subpoenas and litigation rather than answers.[3] This approach left market participants asking why they should even try to comply with SEC rules, when they could move their operations offshore. Regulation Crypto Assets would replace the guesswork with fixed thresholds, defined disclosure obligations, and a set of conditions that issuers can measure themselves against before they make their offering-not after they are told they "got it wrong" in hindsight.

Notably, with respect to any legislative developments, nothing in the proposal precludes the Commission from taking into account such developments in formulating or responding to future crypto policies. To the contrary, legislative CLARITY would be beneficial to market participants and regulatory agencies.

I look forward to hearing feedback from market participants on the proposed thresholds, conditions, and other provisions. I thank Commissioner Hester Peirce for her longstanding leadership on crypto issues-from the dark days of the prior administration through her leading the Crypto Task Force. Thank you also to the staff of the Division of Corporation Finance, the Division of Economic and Risk Analysis, the Crypto Task Force, the Office of the General Counsel, the Office of the Chief Accountant, the EDGAR Business Office, the Division of Investment Management, and the Division of Trading and Markets, for their work on this proposal.