The SEC’s proposed crypto rules could make it easier for blockchain projects to raise money without facing the same reporting requirements as traditional public companies.
On Aug. 18, the Securities and Exchange Commission proposed a new framework called Regulation Crypto Assets. Under the proposal, crypto projects could raise up to $75 million a year without going through the full securities registration process.
The proposal follows guidance issued by the SEC and Commodity Futures Trading Commission in March that classified 18 major cryptocurrencies as digital commodities rather than securities. The new rules aim to address areas that were not covered by that earlier guidance.
Easier fundraising for crypto projects
The proposal would create different fundraising tiers based on how much money a project wants to raise.
A new project could raise up to $5 million over four years under a startup exemption, with disclosures published on its website rather than filed with regulators.
Larger projects could raise up to $20 million a year under a first tier, with unaudited financial information. A second tier would allow projects to raise up to $75 million a year, but would require audited financial statements and ongoing reporting.
The rules would also allow some projects to reduce their regulatory obligations after they complete or permanently stop the development work promised to investors.
Ethereum and Solana could benefit
The proposed rules are unlikely to have a major direct impact on holders of major cryptocurrencies such as Bitcoin, XRP, Cardano or Dogecoin.
However, networks with large and active developer ecosystems, particularly Ethereum and Solana, could benefit if the rules are adopted. Easier fundraising could encourage more projects to launch on these networks, potentially bringing more developers, capital and activity on-chain.
That does not necessarily mean higher token prices, however. Increased network activity does not always translate into better returns for token holders.
The proposed fundraising limits could also be too low for some established projects. For example, DeFi lending protocol Morpho raised $175 million in June, well above the proposal’s $75 million annual limit.
The SEC proposal is not yet a final rule. It will go through a 60-day public comment period after publication in the Federal Register, followed by further work before any rules could take effect.
Featured image from: reddit.com