SEC Proposes Tailored Crypto Framework as CLARITY Act Stalls

The US Securities and Exchange Commission (SEC) has proposed a new regulatory framework for certain crypto asset offerings after the US Senate failed to debate the CLARITY Act ahead of the August recess.

The US Senate is now expected to vote on the CLARITY Act after lawmakers return on September 15.

Announced on August 18, the new framework, entitled Regulation Crypto Assets, would introduce two exemptions to certain investment contracts involving crypto assets from the registration requirements of the Securities Act of 1933. The first would allow a one-time offering of up to $5 million over four years, while the second would permit offers of up to $75 million in any 12-month period.

Issuers using either exemption would have to provide investors with principles-based narrative disclosures. Those relying on the larger exemption would also need to provide financial statements and face ongoing reporting requirements.

The proposal includes a conditional safe harbor designed to clarify when a crypto asset is no longer subject to an investment contract. To qualify, an issuer would need to have completed or permanently ended the essential managerial work promised under the contract.

Regulation Crypto Assets would also override state-level securities law registration and qualification requirements covering exempt offerings and some secondary-market transactions.

The SEC said the framework builds on interpretive guidance issued in March and is intended to reduce incentives for crypto businesses to operate offshore while maintaining investor protections.

SEC Chairman Paul S. Atkins said:

Today, we are charting a new course with a package of exemptions that would facilitate capital formation and allow crypto asset innovation to flourish in the United States in the years ahead.

The proposal is not yet in effect. A 60-day public comment period will begin following its publication in the Federal Register.