The United States Securities and Exchange Commission (SEC) has proposed a new draft code on encrypted assets to provide two types of financing exemption for token issuance. This means that some of the projects may, in the future, fund-raising without a complete securities registration process, subject to the requirements for disclosure.

Two types of financing exemption

The draft is entitled “Encrypted Asset Control”. One of them is for start-up projects, which allow digital issuers to finance up to $5 million over four years. Another, for a larger issuer, allows financing up to $75 million every 12 months, provided that financial statements are submitted and business information is disclosed on an ongoing basis.

The SEC states that neither of these exemptions amounts to complete deregulation. The issuer still has to fulfil its obligation to disclose the information, and the anti-fraud and anti-manipulation rules at the federal level will continue to apply.

Safe harbours involve token characterization

The draft also includes a conditional safe harbour that allows the issuer to separate an encoded asset from the investment contract corresponding to the asset at the time of the initial sale, upon fulfilment of the conditions set by the SEC.

The significance of this arrangement is that certain tokens initially sold through a securities exchange may no longer be bound under the same legal relationship in the future. The long-debated question of whether “the token itself is equivalent to securities” was considered a substantive adjustment.

Rapid advancement after cancellation of meetings

Before the draft was launched, the SEC abruptly cancelled the meeting scheduled to discuss the framework last week on the grounds that it was a “crash agenda”. A few days later, the Commission moved forward on the proposal, indicating that it was trying to address some of the industry ' s claims first through regulatory rules in the face of poor legislative progress.

Earlier, negotiations around Clarity Act had been frustrated and the market had cooled expectations that the United States would complete encryption market structure legislation this year. The bill was originally seen as an important legislative option for the United States encryption industry. SEC Chairman Paul Atkins had indicated in late July that the Commission was prepared to propose its own rules in the event of insufficient parliamentary legislation.

SEC Commissioner Hester Peirce indicated that the current proposal could not cover all types of encryption projects and the Committee hoped that the industry would continue to provide feedback in order to adjust the rules.

Additional information:It was reported that SIFMA, a Wall Street industry organization representing coupons, investment banks and regulatory agencies, had discussed whether or not to challenge the competence of the SEC; and that the United States Treasury Department this week had also presented a draft set of rules for the GEONIUS Act to require the issuer of a stable currency to obtain a federal or state licence as of January 2027.