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    3. Interpretation of SEC's New Crypto Regulations: No Registration Required for Fundraising Below $5 Million, Is the Altcoin Season Coming Back?

    Interpretation of SEC's New Crypto Regulations: No Registration Required for Fundraising Below $5 Million, Is the Altcoin Season Coming Back?

    By: www.odaily.news|2026/08/20 00:24:21
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    Original | Odaily Planet Daily (@OdailyChina)

    Author | jk

    On August 18, local time in North America, the U.S. Securities and Exchange Commission (SEC) officially released a new regulatory proposal titled "Regulation Crypto Assets" to establish a tailored issuance framework for investment contracts involving crypto assets. This marks the most significant substantive action taken by SEC Chairman Paul Atkins in the field of crypto regulation since taking office, and it is a key signal of the regulatory agency's proactive approach amid the ongoing stagnation of the CLARITY Act in Congress.

    What are the new regulations: Two exemptions, altcoins can start running

    According to the SEC's official announcement, the core content of the "Regulation Crypto Assets" includes two exemptions from registration under Section 5 of the Securities Act of 1933, as well as a conditional safe harbor rule.

    1. Startup Exemption

    Allows early-stage projects to raise up to $5 million over a maximum period of four years without completing the full registration process. Issuers only need to provide narrative disclosures based on principles, simplifying the process closer to a notification-type filing.

    2. Fundraising Exemption

    Allows issuers to raise up to $75 million within any 12-month period. This exemption mechanism largely mirrors the existing Regulation A+ framework, divided into two tiers. In addition to narrative disclosures, issuers must submit audited financial statements and bear ongoing reporting obligations. Issuers under both exemptions are not exempt from federal securities laws' anti-fraud and anti-manipulation provisions.

    In other words, if an issuer needs to raise funds by issuing tokens, they can choose to apply one of the two exemptions based on the scale of fundraising, without having to go through the traditional, time-consuming, and costly SEC full registration process:

    • If it is just a small-scale early fundraising (not exceeding $5 million in total over four years): For example, a newly started project wants to sell tokens on a small scale to kickstart development, they can use the Startup Exemption, only needing to clearly describe the project situation in plain language (narrative disclosures), no need for audited financial statements, the process is simple, closer to filing than approval.
    • If the fundraising scale is larger (up to $75 million per year): For example, if the project has a certain foundation and wants to raise funds from a broader public, they must use the Fundraising Exemption, and in addition to narrative disclosures, they must also submit audited financial statements and continue to report to the SEC after receiving funds (similar to the periodic disclosure obligations of listed companies).

    Under these rules, the issuance of altcoins in the U.S. is completely legal.

    Original text from SEC. Source: SEC

    3. Investment Contract Safe Harbor

    According to this safe harbor provision, once the issuer has completed or permanently ceased the "essential managerial efforts" previously promised to investors, the relevant crypto assets will no longer be considered bound by the definition of an "investment contract," meaning that the asset can "detach" from its securities characteristics.

    Additionally, the proposal includes a redefinition of "qualified purchaser," which means that securities issued under the exemptions of the "Regulation Crypto Assets" and related secondary market transactions will be exempt from state securities law registration and qualification review requirements (i.e., federal law takes precedence over state law/preemption).

    In other words, if a token was initially sold as an "investment contract" (for example, the project promised, "We will work hard to develop, maintain, and operate this network, and the token will have value in the future"), then over time, as long as specific conditions are met, this token can no longer be regulated as a security:

    The triggering condition is that the project has done what it was supposed to do, or has stopped doing it. Either the project has completed the promised "essential managerial efforts" (for example, the network has been built, the degree of decentralization is sufficient, and it no longer relies on a specific team for maintenance); or the project has permanently ceased to fulfill these commitments (for example, the team disbands, and the project is abandoned). In short, as long as investors can no longer reasonably expect the project to continue to "work for" the token, this token can detach from the constraints of the investment contract and no longer be classified as a security.

    Original text from SEC. Source: SEC

    Once the conditions are met, the buying and selling of this token will no longer be treated as securities transactions, and there will be no need to go through securities registration or be subject to lock-up rules, allowing exchanges to list and trade more freely.

    When the token is first issued, it is treated as a security because the project promises, "I will work hard to make it valuable"; but once the project fulfills its promise (or completely stops working), the token can become an ordinary asset that is not subject to securities law.

    In other words, all tokens from teams that have run away can be treated as non-securities, not subject to SEC regulation, and large transactions do not need to be reported, clearing all regulatory obstacles.

    It is worth noting that the SEC specifically defines the term "covered investment contract" in the proposal, limiting it to:

    (1) Involving a specific crypto asset;

    (2) The crypto asset itself does not belong to securities;

    (3) The investment contract does not involve any other assets besides the crypto asset (whether securities or non-securities).

    This strict scope definition determines that the two exemptions and the safe harbor only apply to the narrow issuance scenarios of crypto assets and do not apply to the issuance of "security-type" or "tokenized securities."

    The issuance of this proposal is due to the stagnation of the Clarity Act

    "Regulation Crypto Assets" is a continuation and implementation of a series of policy actions by the SEC over the past year and a half:

    • January 2025: Trump signed an executive order "Strengthening America's Leadership in Digital Financial Technology," establishing the "Presidential Working Group on Digital Assets."
    • Early 2025: The SEC established a Crypto Task Force, led by Commissioner Hester Peirce, to solicit public opinions, receiving over 300 comment letters.
    • July 2025: The Presidential Working Group released a report, clearly recommending that the SEC utilize its rule-making and exemption authority to establish a tailored registration exemption mechanism, a time-limited safe harbor for securities issuance involving digital assets, and exemption arrangements for "airdrops." Atkins subsequently announced the launch of the "Project Crypto" initiative.
    • March 17, 2026: The SEC and CFTC jointly released the "2026 Interpretive Guidance," systematically categorizing crypto assets into five categories—digital commodities, digital collectibles, digital tools, stablecoins, and digital securities, and clarifying under what circumstances non-security crypto assets would be considered to "fall into" or "detach from" the definition of investment contracts. This guidance is also the direct theoretical basis for the current "Regulation Crypto Assets" proposal.
    • August 18, 2026: "Regulation Crypto Assets" was officially released as a rule proposal, entering a 60-day public comment period.

    The SEC admits in the proposal that its past regulatory approach to crypto assets primarily relied on the Howey Test established by the Supreme Court in 1946, which has two major flaws: first, the Howey Test itself is difficult to apply to new types of assets like crypto assets, whose rights attributes evolve over time; second, the current disclosure rules (such as Regulation S-K and Form 1-A) often require disclosures that are disconnected from the information that crypto asset investors truly care about (such as token economics, network governance mechanisms, source code security, etc.). This is also the reason why Rule 103's "principle-based disclosure requirements" were specifically designed in this proposal.

    More critically, the SEC's decision to take action at this time is directly related to the severe obstruction of the legislative process in Congress. The CLARITY Act, originally seen as the "ultimate solution" for the crypto industry, has faced repeated setbacks in the Senate since this year: from disagreements between the crypto industry and the banking sector over stablecoin reward clauses to ethical controversies surrounding Trump's own conflicts of interest in crypto assets, the bill has consistently failed to gather enough votes in the Senate.

    The contract quotes on Polymarket regarding the "CLARITY Act will be signed into law in 2026" have dropped from a peak of nearly 82% in February to a range of 18%-21% by mid-August. Although the Senate Majority Leader submitted a motion to end debate on August 8 and set September 15 as the procedural vote date, this vote requires 60 votes in support. Given the current Republican seat count, it still needs to persuade about 10 Democratic senators to switch sides, which is no small task.

    In the context of legislative delays and ongoing pressure from the market and industry, White House crypto policy advisor Patrick Witt stated at the SALT conference that the government is "giving the Senate and Congress ample opportunity," but "will not wait forever." If the legislative window in September fails, the regulatory agency will advance rule-making on its own. "Regulation Crypto Assets" is the concrete realization of this statement. The SEC has chosen to utilize its existing rule-making and exemption authority to provide a transitional regulatory framework for the crypto industry while Congress's legislative efforts remain unresolved, rather than waiting for a bill that could collapse at any moment.

    Timeline: When will it become a formal rule?

    "Regulation Crypto Assets" is currently still in the proposal stage and has not yet taken effect. The key upcoming milestones are as follows:

    • August 18, 2026: SEC officially releases the proposal, docket number S7-2026-27.
    • Within 60 days of publication: The public comment period opens, and anyone can submit comments through the SEC website or via email. The deadline will be determined after the proposal is officially published in the Federal Register.
    • After the comment period ends: The SEC needs to review and respond to all substantive comments before deciding whether and in what form to formally adopt ("adopting release") the final rule. This process has no statutory time limit, and historically, similar rules from proposal to finalization usually take several months or even over a year.
    • November 2026: Hester Peirce plans to leave the SEC, which may affect the internal momentum for advancing this framework.

    Overall, for "Regulation Crypto Assets" to ultimately take effect, it still needs to undergo a complete process of public comment, modification, and formal adoption, and it is expected not to be completed in the short term (within a few months); meanwhile, the legislative process of the CLARITY Act is also filled with uncertainty. For the crypto industry, this means that for some time to come, the regulatory environment for crypto asset issuance in the U.S. will remain in a transitional state of "racing between proposals and legislation, with uncertain outcomes."

    This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.

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    Contents

    What are the new regulations: Two exemptions, altcoins can start running
    The issuance of this proposal is due to the stagnation of the Clarity Act
    Timeline: When will it become a formal rule?

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