SEC Advances Crypto Safe Harbor Proposal to White House Review

The US Securities and Exchange Commission (SEC) has taken a significant step forward in its efforts to regulate the cryptocurrency industry. 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) for review.

The proposal includes three key components: a startup exemption, a fundraising exemption, and an investment contract safe harbor. The startup exemption would allow crypto projects to raise capital over four years with lighter disclosure requirements. Meanwhile, the fundraising exemption would permit issuers to raise a set amount over 12 months while still using other registration exemptions under federal securities law.

The investment contract safe harbor would protect certain digital assets from being classified as securities once the project team has completed all promised efforts to investors. The proposal is designed to work in conjunction with the SEC's token taxonomy guidance, which was released in March. This guidance provides clear parameters for when digital assets will be considered securities.

Atkins emphasized that the agency wants to hear from the marketplace to make the proposal 'workable.' He also noted that additional measures are being built into the package beyond the three main exemptions. One such measure is an innovation exemption, which would function like a regulatory sandbox for onchain assets. This concept has drawn pushback from traditional finance institutions, who argue that broad exemptions could weaken investor protections and market oversight.

The SEC's crypto safe harbor proposal will undergo OIRA review before being published in the Federal Register and opened for public comment. Once complete, the proposal will be subject to changes based on feedback received during the public comment period.