Atkins says Regulation Crypto Assets proposal aims to provide clear capital-raising pathways while Congress works on lasting framework
“As Congress works to establish a lasting regulatory framework, our new proposal, Regulation Crypto Assets, seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws. https://t.co/0ItLaMrDE9”
Atkins calls Regulation Crypto Assets proposal the most historic step yet to modernize federal securities regulations for crypto
“With our new proposal, the SEC is taking the most historic step yet to modernize federal securities regulations for crypto assets. As the Crypto Capital of the World, the U.S. must and will lead. Regulation Crypto Assets will ensure that we do. 🇺🇸 https://t.co/z0MmDF4doV”
Atkins details startup exemption allowing $5 million over four years and fundraising exemption allowing $75 million per year.
“The startup exemption would permit offerings of up to $5 million during a four-year period.”
Atkins suggests crypto vaults may qualify as investment contracts under the Howey test.
“A vault, for example, could be a common enterprise in which users invest money with a reasonable expectation of profits to be derived from the vault deployer’s and curator’s entrepreneurial or managerial efforts.”
Atkins criticizes prior SEC approach of advancing untested legal theories through enforcement rather than rulemaking for crypto.
“The Commission’s approach to crypto in recent years—advancing untested legal theories through enforcement actions rather than rulemaking—deprived the public and market participants of the opportunity to have input into the development of workable rules.”
Atkins says those who engaged with the SEC in good faith faced subpoenas and litigation rather than answers.
“Those who tried to engage with the Commission in good faith found themselves facing subpoenas and litigation rather than answers.”
Atkins describes safe harbor allowing crypto assets to exit SEC jurisdiction after managerial efforts cease and conditions are met.
“Under this safe harbor, if the issuer certifies to the Commission that it has ceased or terminated all essential managerial efforts that it promised to undertake under the investment contract and satisfies certain other conditions, then the Commission would no longer deem the non-security crypto asset to be subject to an investment contract”
Atkins warns that contorting interpretations to avoid securities laws will lead to painful consequences.
“If you do headstands, backflips, and other gymnastics to read the law so that it does not apply to crypto assets and activities that are well within the scope of the federal securities laws, you will have a painful fall.”
Atkins proposes a safe harbor allowing issuers to delink crypto assets from their original investment contracts.
“In addition to the startup and fundraising exemptions, the proposed rules would include a conditional safe harbor by which an issuer of an investment contract could delink a crypto asset from the investment contract with which it was once associated.”
Atkins seeks feedback on enabling crypto tokens to function like equity for token holders to share in network value.
“I would particularly welcome thoughts on facilitating the ability of crypto assets to serve a role akin to equity to enable token holders to share in the growth and value of the enterprise that builds a crypto network.”
Atkins seeks feedback on enabling crypto tokens to function like equity, sharing enterprise growth and value.
“The Commission wants to accommodate innovation on many fronts, and our rules need to be tailored to changing market developments and designed to protect investors and market integrity.”
Atkins proposes two exemptions for crypto offerings: $5 million over four years for startups, $75 million annually for fundraising.
“Two new exemptions from registration under the Securities Act would be created for offerings of covered investment contracts: a “startup exemption” for up to $5 million over a four-year period, and a “fundraising exemption” permitting up to $75 million during each 12-month period.”
Atkins states that moving securities activities onchain does not remove them from SEC jurisdiction.
“Moving activities that fall within the scope of the federal securities laws onchain, as a general matter, does not take those activities outside the scope of the laws the Commission administers.”
“The proposed rules include two offering exemptions tailored for innovations in the crypto asset markets: a “startup exemption,” which would allow for offerings up to $5 million during a four-year period, and a “fundraising exemption” allowing for offerings of up to $75 million each year.”
Atkins clarifies that exempting some crypto assets from securities laws does not exempt all crypto activities.
“That the securities laws do not apply to all crypto assets and activities, however, does not mean that the securities laws do not apply to any crypto assets or activities.”
Atkins says the SEC now provides clarity on whether digital assets are securities before investors and entrepreneurs act.
“we have delivered long-called-for certainty to digital asset issuers—so that investors and entrepreneurs today can know, before they act, whether a digital asset is considered a security and therefore subject to SEC oversight.”
Atkins details second exemption permitting up to $75 million crypto offerings annually with financial disclosure requirements.
“The fundraising exemption, conditioned on the provision of financial statements and ongoing reporting requirements, would permit offerings of up to $75 million during each 12-month period.”
Atkins proposes two crypto offering exemptions: $5 million over four years for startups, $75 million annually for fundraising.
“a “startup exemption,” which would allow for offerings up to $5 million during a four-year period, and a “fundraising exemption” allowing for offerings of up to $75 million each year.”
Atkins invites industry input on modifying SEC rules to accommodate vaults and onchain lending innovations.
“We welcome your thoughts on whether we need to modify our rules to accommodate vaults, onchain lending, or other innovations and how we can do so while still ensuring that investors are protected, markets are fair, orderly, and efficient, and capital formation is facilitated.”
Atkins says a generation struggled with SEC forcing inapt rules on crypto; today's proposal offers clear enforceable framework.
“More recently, a whole generation has struggled with the SEC’s insistence, without regard for adverse effects on investors and entrepreneurs, that people apply a set of inapt rules to crypto.”
Atkins says persons who sought to register crypto offerings were given a bureaucratic runaround with no resolution.
“Persons who sought to register their crypto offerings were often given a bureaucratic runaround with no resolution in sight.”
Atkins announces SEC-CFTC memorandum of understanding to align definitions and eliminate overlapping crypto oversight gaps.
“after years of fragmented oversight and overlapping authorities, the SEC and CFTC signed an historic Memorandum of Understanding between our two agencies—a framework for aligning key definitions, coordinating oversight, and replacing a regulatory no man’s land between the two agencies with new fertile ground for innovation to grow.”
Atkins describes vaults as spanning from fully automated smart contracts to discretionary human management.
“They fall along a spectrum from programmatic allocations determined solely by immutable smart contracts, to allocations at the sole discretion of another person or group of persons.”
Atkins states vaults holding securities may trigger Investment Company Act registration requirements.
“A vault that holds securities or allocates assets to investments in securities could fall into investment company territory.”
Atkins invites vault and lending operators to engage SEC about compliance pathways.
“You may not fall within our regulatory scope, but, if you do, we welcome the opportunity to talk with you about how to serve your customers in compliance with the federal securities laws.”
“Even when a crypto asset was properly treated as a security, prospective issuers were provided no realistic way to comply with the Commission’s registration process.”
Atkins argues sensible, clear, and enforceable rules enable builders to work and government to enforce.
“Having rules that are sensible, clear, and enforceable is key to a well-functioning society. People whose ambition is to build good things for other people can work with such rules, and government can enforce them.”
Atkins argues international jurisdictions have been more nimble on crypto regulation than the United States.
“In comparison, our international counterparts have been more nimble and have accommodated these new technological innovations, of course without the benefits to American investors or American legal and investor-protection standards.”
Atkins announces the Commission proposes two registration exemptions tailored for crypto assets sold as investment contracts.
“Today, the Commission proposes new fundraising pathways tailored for the unique characteristics of crypto assets being sold as part of investment contracts.”
Atkins announces startup exemption allowing crypto offerings up to $5 million over four years without registration.
“Regulation Crypto Assets would include two exemptions from registration under the Securities Act of 1933. The startup exemption would permit offerings of up to $5 million during a four-year period.”
Atkins proposes a safe harbor from investment contract definition once issuers complete all promised managerial efforts.
“In addition, a conditional safe harbor from the definition of “investment contract” under the Securities Act and the Securities Exchange Act would be available once an issuer has completed or otherwise permanently ceased all essential managerial efforts that it represented or promised it would engage in under the covered investment contract.”