Crypto’s Proposed Safe Harbor
Jeffrey Johnson, Director & Compliance Officer
On August 18, 2026, the Securities and Exchange Commission (“SEC”) proposed a new rule, titled "Regulation Crypto Assets," designed to create tailored offering exemptions for certain investment contracts involving crypto assets. According to the SEC, the proposal aims to provide greater regulatory clarity, facilitate capital raising, and reduce incentives for crypto businesses to operate outside the United States, all while still protecting investors.
The proposal comes several months after the SEC’s March 2026 interpretive guidance on how federal securities laws apply to crypto assets and related transactions. Regulation Crypto Assets seeks to establish a more practical framework for issuers that wish to raise capital while continuing to adhere to federal regulations.
What's Being Proposed?
Regulation Crypto Assets would create two new exemptions from the Securities Act of 1933 (“Securities Act”) registration requirements specifically designed for certain crypto-related investment contracts.
Startup Exemption
This one-time exemption would permit eligible issuers to raise up to $5 million over a four-year period without registering the offering with the SEC. Issuers relying on this exemption would still be required to provide investors with principles-based narrative disclosures regarding the offering.
Fundraising Exemption
The second exemption is two-tiered allowing for larger capital raises. Tier 1 would permit issuers to conduct offerings up to $20 million during a 12-month period, while Tier 2 would allow offerings of up to $75 million during a 12-month period. In addition to narrative disclosures required in Tier 1 offerings, issuers using the Tier 2 exemption would be required to provide additional financial disclosures regarding the issuer’s financial condition as well as financial statements (audited statements for issuers of Tier 2 offerings).
Issuers that rely on either exemption must still adhere to the anti-fraud and antimanipulation provisions of the federal securities laws.
The Proposed Safe Harbor
The proposal also introduces a conditional safe harbor to the "investment contract" in the definition of “security” in the Securities Act. Under the proposal, a crypto asset could cease being treated as subject to an investment contract if specific conditions are satisfied, including situations where an issuer has completed or permanently ceased the essential managerial efforts it promised to undertake.
SEC Chairman Paul S. Atkins notes in the press release “As we continue the Commission’s efforts to provide clarity for crypto markets, and as Congress works to establish a lasting regulatory framework, Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws. In line with the Commission’s earlier interpretative guidance, this proposal would also allow for a safe harbor once an issuer has completed or permanently ceased all essential managerial efforts that it represented or promised it would take under an investment contract. Congress designed our securities laws to amplify – within specific guardrails – opportunities for entrepreneurs to innovate and build new products. Advancing this regulatory framework is a key element in our strategy to advance the rule books for the modern era and another step by the Commission to onshore innovation in crypto asset markets for generations to come.”
Federal Preemption and Secondary Trading
The proposed rules would also preempt certain state securities registration and qualification requirements for securities issued under Regulation Crypto Assets. In addition, the proposal would extend that treatment to certain secondary market transactions.
If adopted, this aspect of the rule could reduce compliance complexity for issuers that currently face a patchwork of federal and state requirements when offering or facilitating transactions involving crypto-related securities.
Why This Matters
The SEC has framed the proposal as an effort to address longstanding concerns that existing securities regulations do not always align neatly with the lifecycle of crypto networks and tokenized projects. According to the SEC, the proposal is intended to:
Clarify compliance pathways for crypto entrepreneurs.
Support capital formation within the United States.
Reduce incentives to structure projects offshore.
Expand investment opportunities for U.S. investors.
Preserve investor protections through disclosure and reporting obligations.
The proposal also reflects a continuing shift toward developing crypto-specific regulatory tools rather than reliance on traditional securities regulation developed long before digital assets emerged.
Practical Considerations for Market Participants
Organizations involved in crypto asset issuance, fundraising, trading, custody, or compliance should consider several questions:
For Issuers
Would either proposed exemption provide a more efficient alternative to existing offering exemptions?
What disclosure and reporting infrastructure would be necessary to comply with the new framework?
Could the proposed safe harbor eventually reduce long-term securities law obligations associated with a crypto asset project?
For Compliance Teams
How would existing compliance programs need to be adapted to accommodate the new disclosure requirements?
What controls would be needed to monitor ongoing eligibility for any safe harbor provisions?
How might state law considerations change if preemption provisions are adopted?
For Investors
Will the proposed disclosure requirements provide sufficient transparency to evaluate crypto asset offerings?
How should investors assess projects transitioning toward safe harbor eligibility?
What continuing reporting information would be available under the larger offering exemption?
What Comes Next?
The SEC has opened a 60-day public comment period following publication of the proposing release in the Federal Register. During that period, industry participants, investors and other stakeholders will have an opportunity to provide feedback on the proposal before any final rules are considered.
Chenery Compliance Group is here to help. If you would like to schedule time to meet with one of our senior compliance professionals, please contact us here.