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SEC Drafts 'Regulation Crypto' Exemption for Token Launches
The SEC is drafting a rule to give developers a temporary registration exemption for digital asset investment contracts, shifting from enforcement to rulemaking.
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The Securities and Exchange Commission is drafting a rule proposal that would temporarily exempt developers from full securities registration when launching digital asset investment contracts, according to people familiar with the matter. The plan, internally called "Regulation Crypto," would allow token sales to accredited investors during a grace period of 12 to 18 months.
The proposal represents a departure from the enforcement-heavy approach under former Chair Gary Gensler, who treated most token offerings as unregistered securities, the people said. Acting leadership, with Paul Atkins awaiting Senate confirmation, has signaled a willingness to write tailored rules for digital assets.
"Regulation Crypto" applies specifically to "digital asset investment contracts," a term the SEC has used in enforcement actions but never defined by rule. During the exemption window, developers could sell tokens without triggering the Howey test, people familiar said. After the period expires, tokens that show clear centralization or profit dependence on a promoter's efforts would fall under SEC jurisdiction.
Bitcoin and ether, classified as commodities by the SEC and the Commodity Futures Trading Commission, are unlikely to see direct effects. The proposal targets mid-tier and emerging projects, many of which have moved operations offshore to avoid U.S. securities law.