The SEC’s crypto safe harbor proposal is one step closer to becoming official. On Monday, SEC Chair Paul Atkins confirmed that the Regulation Crypto Assets proposal had been submitted to the Office of Information and Regulatory Affairs (OIRA), the final step before the rule is published for public comment in the Federal Register. This marks a major milestone for crypto regulation as it moves toward its final approval.
What should the crypto market expect?
The SEC chair outlined the valued features of the proposal in his open remarks at the Digital Assets Summit hosted by Vanderbilt University. The safe harbor framework is designed to offer crypto projects more flexibility in raising capital before they must register with the SEC. In his remarks, “We’ll have reg crypto that we’ll be proposing here shortly,” Atkins said.
The proposal is set to cover three main areas: startup exemptions, fundraising exemptions, and an investment contract safe harbor. The exemption will allow crypto projects to fundraise a certain amount of funds over a four-year period without sudden SEC registration.
This exemption is designed for issuers who can raise capital over a 12-month period while using other exemptions. Finally, the investment contract safe harbor would ensure certain digital assets are not classified as securities once project teams complete their promised efforts.
Crypto safe harbor collaboration with token taxonomy
The safe harbor proposal is aligned with the SEC’s recently released token taxonomy guidance. This is the first time the SEC has provided clear parameters on when digital assets should be classified as securities.
According to Atkins, the safe harbor framework will work in conjunction with these guidelines. The goal is to establish a clearer and more consistent approach to crypto regulation while fostering innovation.
Paul Atkins noted that the SEC is open to any response from the market, stating that they want the proposal to be workable and adaptable. The SEC is also taking time to construct more measures into the proposal beyond the initial exemptions to address concerns and needs that may develop.
Innovative exemption and extended crypto legislation
Another regulatory sandbox that the SEC is currently working on is an innovation exemption that would cover on-chain assets. This concept has been met with criticism by traditional finance institutions that claim that the exemptions may result in less protection of investors. Despite this, Atkins asserted that the SEC has the authority to pursue such exemptions and will release additional details soon.
Meanwhile, Congress is in the process of creating crypto legislation that would provide a supplement to the SEC framework. Atkins emphasized that regulation would be more permanent with the legislation as opposed to agency rules, which can be altered whenever a new administration takes office. After being revised by OIRA, the SEC proposal will go to the Federal Register to be publicly commented upon.
The OIRA review is a standard process in the federal rulemaking procedure. After this review is finalized, the SEC proposal will be made open to be commented on. This will enable market players to give feedback prior to the official release of the final version of the proposal.