SEC proposes rules to ease crypto fundraising

• Key takeaway: The Securities and Exchange Commission is proposing two exemptions for certain crypto companies looking to raise capital. The first would allow a one-time offering of up to $5 million over four years, while the second would permit companies to raise up to $75 million in any 12-month period.
• Expert quote: "The SEC continues to support congressional work on the CLARITY Act, and we expect to see the bill reach the president's desk. Under our current statutory authority, we are acting. The work before us is too important." — SEC Chair Paul Atkins
• What's at stake: The SEC proposal comes as Congress works to advance the CLARITY Act, which would establish a comprehensive legal framework for the entire crypto market.

The Securities and Exchange Commission kicked off rulemaking Tuesday to streamline how crypto companies raise money, days after the agency abruptly canceled a meeting where it was expected to consider the proposal.

The SEC canceled the meeting Friday because of an "unforeseen scheduling issue" and said it would be rescheduled, without providing a new date. The agency instead released the proposed rules Tuesday. 

The proposed rules, dubbed "Regulation Crypto Assets," include two exemptions that would allow certain crypto companies to raise capital without going through the traditional securities registration process. 

The first would permit a one-time offering of up to $5 million over four years. The second would allow companies to raise up to $75 million in any 12-month period, with issuers subject to ongoing reporting requirements. Both exemptions would require issuers to provide disclosures to investors.

The public comment period will be open for 60 days after the proposed rule is published in the Federal Register.

In a recorded video Tuesday, SEC Chair Paul Atkins said that the proposal "sits at the center" of the agency's agenda and is essential to providing a framework for crypto asset fundraising. He also said the agency supports passage of the much-anticipated crypto market structure bill but that time is of the essence. 

"The SEC continues to support congressional work on the CLARITY Act, and we expect to see the bill reach the president's desk," said Atkins. "Under our current statutory authority, we are acting. The work before us is too important."

The proposed rule also includes a conditional safe harbor that could allow certain crypto assets to eventually fall outside the definition of a security if they meet specific requirements. The rules would also prevent states from imposing separate securities registration requirements on certain crypto offerings that qualify for the federal exemptions.

As lawmakers advance the crypto market structure legislation, Atkins said the proposed rulemaking would help ensure "that America remains the world's premier destination to innovate [and] raise capital."

"It is the commission's answer to the question that has puzzled innovators since the birth of the blockchain: How can I raise capital to develop a crypto asset while I am still working to develop the network where it will be used?" Atkins said.

The CLARITY Act would establish a long-term, comprehensive legal framework for the entire crypto market, including clarifying the responsibilities of the SEC and CFTC and creating clearer registration pathways for exchanges and custodians. After much anticipation the bill was not brought up for a vote before the Senate's August recess, which began Aug. 6. 

Previously, the bill was delayed for weeks because of disagreements between Republicans and Democrats over how to enforce its ethics provisions and whether President Donald Trump's Justice Department could effectively police potential conflicts of interest involving the president and the crypto industry. 

The SEC proposed rules come after the agency abruptly canceled an open meeting to consider issuing a release proposing new rules "to create a tailored offering regime for certain investment contracts involving crypto assets," according to a public notice.

According to Bloomberg, the SEC was expected to propose this crypto-related framework Friday. The agency was also expected to propose an "innovation exemption" allowing tokenized stocks to trade on blockchains around the clock, which was not included in this rulemaking.