Regulation Crypto Assets Comments Deadline Sees 100s of Opinions

Yesterday, the deadline for comments on the Securities and Exchange Commission’s proposed Regulation Crypto Assets rules ended. While the SEC is typically rather lenient on deadlines, most perspectives have likely been submitted before it promulgates a final rule. On the final day, interested parties submitted a blitz of filings. Supporters and opponents of the proposed rules shared their perspectives.

The SEC proposed the Regulation Crypto Assets rules last August and sought to create a bespoke exemption for issuers in the digital asset sector. The proposed rules resemble exemptions that enable online capital formation under Reg CF and Reg A.

In brief, the proposal supports a one-time exemption for startups that would permit offerings of up to $5 million during a four-year period. A second iteration would permit offerings of up to $75 million during each 12-month period. For both options, an issuer would be required to make principles-based disclosures. For the second exemption, which has the $75 million funding cap, issuers would need to file financial statements alongside ongoing reporting.

The mission is to support digital asset innovation in a regulated manner that reflects crypto’s unique characteristics.

Letitia James, New York Attorney General, declared the proposal exceeded the SEC’s exemptive authority. The AG said the startup exemption had deficiencies, that insider sales posed risks, and that the proposal created an “unworkable framework” for investment contracts, while insisting state oversight authority must be preserved.

“In conclusion, our work enforcing the law against crypto asset market issuers, brokers and dealers has identified the need for stronger, more comprehensive regulations to address the substantial risks identified here. The market has demonstrated that it is ill-suited for the more relaxed, permissive regulation contemplated in the Proposal.”

James demanded that the proposal be withdrawn.

Jonathan Jachym, Chief Policy Officer at Payward, Kraken’s parent company, said the proposal is an “important step toward a U.S. market where new assets can be issued, distributed, and traded with confidence.” He packaged the proposal as supporting global competitiveness for the US as founders choose where to raise funding and build their services.

“U.S. markets compete globally for issuers, investors, and liquidity. With both the Commission and the CFTC now writing rules, consistent rules at home and alignment with other major jurisdictions would give American founders, builders, and investors the clarity they need and put U.S. markets on equal footing with other jurisdictions.”

SVP, Digital Assets & Innovation Policy at the Independent Community Bankers of America (ICBA), Brian Laverdure, said the SEC should proceed cautiously, coordinate with federal banking agencies, and analyze the impact on bank funding costs, deposit migration, and more. He added that the proposal is “part of a consequential restructuring of the framework governing digital-asset issuance, distribution, and trading, with effects extending beyond crypto-market participants.”

William Galvin, Secretary of the Commonwealth of Massachusetts, firmly stated that the proposal should not move forward.

“I have grave concerns relative to specific provisions; I entirely reject the notion that everyday investors will be adequately protected in the market for crypto investments without a complementary state regulatory regime … I urge the Commission to reconsider this misguided proposal. Instead, the Commission should create a registration pathway and, at a bare minimum, adopt fulsome disclosure requirements coupled with substantive pre-qualification review.”

Public Citizen, the non-profit founded by Ralph Nader, called crypto a “Ponzi scheme” with no real utility.

“The SEC should instead resume enforcement actions, including those commenced during the time of the first Trump administration, to arrest the many frauds in this arena. Public Citizen members hold assets overseen by the SEC and depend on the integrity of the market. Cryptocurrencies challenge that integrity.”

Nasdaq Executive Vice President John A. Zecca expressed his firm’s support for the proposal, while commending the Commission, with some caveats. Zecca said

“Our overall position is one of support for a tailored framework, subject to the observations set out in this letter. We write both to endorse aspects of the Proposal we regard as well-designed and to identify a small number of points on which we believe the Proposing Release, and any future adopting release or final rule text, warrants refinement.”

He expressed their support for a “bespoke, disclosure-based federal framework for offerings and secondary trading of crypto assets that satisfy the elements of an investment contract.”

The Solana Policy Institute described the proposal as a significant step toward a tailored and fit-for-purpose offering that incorporated disclosure, as well as a transition framework for investment contracts involving “non-security crypto assets.”

Solana Policy Institute CEO Miller Whitehouse‑Levine and General Counsel Patrick Wilson said:

“We commend the Commission for its thoughtful approach and strongly support the prompt adoption of the proposal. That said, in our view, the ultimate utility of Regulation Crypto Assets will turn on key practical points, including whether projects can launch under proposed Rule 200, reasonably disclose the requisite material network facts under proposed Rule 103, and obtain reliable proposed Rule 400 transition treatment.”

Their objective was to refine specific provisions.

The Wall Street Blockchain Alliance thanked the Commission for its “efforts to establish a tailored regulatory framework for certain investment contracts involving crypto assets and to provide greater clarity for issuers, investors, and other market participants.”

“The Commission’s proposal is a constructive step toward that clarity, and the WSBA offers the following selective comments to help ensure the final rules are administrable, technology-neutral, and protective of investors without chilling responsible innovation.”

The WSBA continued to address certain provisions with questions and recommendations.

Beyond the expected partisan grandstanding, the digital asset sector offered some solid recommendations while detractors circled the wagons. Ultimately, the US must establish workable rules to guide the global digital asset industry, protect investors, and avoid letting other jurisdictions define the regulatory path without US leadership. The Commission, under Chairman Paul Atkins, is determined to accomplish this task.