The compliance arbitrage logic of "offshore hedging" from the past eight years is being pulled back in the opposite direction.

Written by: Conflux

On July 7, the SEC updated its regulatory agenda for 2026.

The outside world mainly focused on the "cryptocurrency safe harbor"—which is indeed a key point, but not the entirety. SEC Chairman Paul Atkins has proposed at least three cryptocurrency-related rules in this agenda: Crypto Assets (exemptions for issuance and sales, safe harbor), broker-dealer cryptocurrency asset financial responsibility and record-keeping rules revision, and Crypto Market Structure Amendments (trading structure amendments). Issuance, custody, and trading—a combined approach is being laid out.

This is a comprehensive infrastructure shift towards compliance, not just a single news item.

From Witch Hunt Model to Licensing Model

First, let’s clarify the magnitude of this shift.

In previous years during the Gensler era, the SEC's approach was "enforcement is regulation"—not providing clear rules and suing first to discuss later.

Coinbase, Ripple, Kraken, Binance, all went through this process during those years. This was a strategy to scare the entire industry away with litigation costs, forcing a large number of projects to relocate to Singapore, the Cayman Islands, or Switzerland, to avoid U.S. regulatory reach.

Now, Atkins' approach is completely reversed. He has clearly linked this agenda to Trump's goal of "making America the global cryptocurrency capital," with the idea of providing project teams a legal window, rather than waiting to be sued. The previous lawsuits against leading exchanges have also gradually been withdrawn.

This is a complete turnaround in regulatory posture: from "hunter" to "licenser." For any team that has previously moved their operations out of the U.S. due to compliance risks, the weight of this signal is heavier than any bullish news.

What’s in the Safe Harbor

Specifically regarding the "Crypto Assets" rule, the terms are not complicated, but each one precisely addresses the pain points of project teams.

• Early-stage projects: Teams with valuations below $5 million and less than four years of establishment can obtain a temporary exemption, without needing to complete the full securities registration process immediately.
• Funding limits: Through specific cryptocurrency investment contracts, entrepreneurs can legally raise up to $75 million.
• Exit mechanism: When the issuer has completed previously promised development and governance work and no longer has substantial management rights over the project, the token itself is no longer classified as a security. The higher the degree of decentralization of the project, the easier it is to "graduate" from securities regulation.

This logic essentially incorporates Hester Peirce's "token safe harbor" concept proposed in 2020 into a formal rules draft for the first time. In the past, this was only a weighty but non-binding internal proposal at the SEC, now it is set to become enforceable rules.

Two Countdown Timers

The rapid acceleration of this matter at the July timeline is because Atkins is racing against two clocks simultaneously.

The first timer is the Clarity Act in Congress. This cryptocurrency market structure bill has already passed the House of Representatives and was released by the Senate Banking Committee in May with a vote of 15 to 9. However, to truly legislate this year, it must pass through the Senate before August—once it drags into the November midterm election season, the window for legislation this year will essentially close.

The second timer is a person. Peirce's second term expired last June, and she is currently only serving as an acting member; she plans to leave for teaching in November. She is the earliest proposer of the safe harbor concept and the most important source of ideas for this new regulation. Once she leaves, whether her successor can continue this framework remains uncertain.

Atkins himself stated very plainly: only rules formally written into the Federal Register cannot be overturned by a mere internal memorandum from future SEC teams. The compliance space relied on employee statements, exemption letters, and interpretive guidance over the past few years—that essentially boils down to "when the person leaves, the politics cool down." What he aims to do this time is to cement the window period.

Not Just Cryptocurrency

Atkins used a very striking phrase in his statement—"Make IPOs Great Again." He directly incorporated the cryptocurrency safe harbor into the SEC's broader narrative of "reviving America's public markets": The number of American public companies has continued to shrink over the years, with an increasing number of companies choosing to remain in private markets for the long term or simply listing on other exchanges. The core anxiety of this round of agenda at the SEC is that the attractiveness of U.S. capital markets is shrinking; cryptocurrency is simply a piece of the puzzle being unlocked rather than the main character.

Even more noteworthy is another line: the SEC plans to promote greater retail investor participation in private markets while retaining necessary protective clauses. If this truly comes to fruition, it would mean that the door to the primary market, which has long been open only to institutions and high-net-worth individuals, would crack open for ordinary investors.

When these two lines are viewed together with the cryptocurrency safe harbor, the logic connects: the SEC is simultaneously opening two pathways of "private market access for retail investors" and "legal fundraising for cryptocurrency projects in the U.S." In the past, ordinary investors wanted to touch cryptocurrency projects in the primary market, but there were two walls in between—one was the entry barriers of the private market itself, and the other was the uncertainty of cryptocurrency assets being classified as securities. This agenda effectively loosens both of these walls.

The "America Repatriation" Narrative

Setting aside the details of the terms, what should be remembered about this agenda is that it is sending a directional signal to the entire industry: The compliance arbitrage logic of "offshore hedging" from the past eight years is being pulled back in the opposite direction.

In recent years, the conventional operation of primary market financing is—entities are established in the Cayman Islands, token sales are conducted in Singapore or Dubai, and U.S. investors cautiously maneuver around, fearing any association with security classifications. This operation model has supported a whole generation of offshore law firms and compliance intermediaries, essentially using geographical distance to hedge regulatory risks.

Once there is a clear safe harbor domestically in the U.S., coupled with supporting rules for custody and trading structures being simultaneously implemented, this offshore dividend will be swiftly diluted. Teams will have no reason to continue paying extra compliance costs and trust discounts for "offshore identities," especially when what is being offered by the U.S. is a guaranteed window, not reliant on personal connections and luck.

Pushing this logic further, it actually involves the pool of funds that have been kept out by the uncertainty of security classifications over the past few years—traditional VCs and family offices, who have always been hesitant to touch any tokens that might be retroactively classified as securities. Once the safe harbor is implemented, the biggest obstacle to these funds entering the market will be dismantled; if retail private access is also relaxed, the subjects connected by this channel will expand from a few institutions to a broader group. The funding structure in the primary market may be reshuffled due to this document.

Of course, this is still only a proposal and has not yet entered the formal public comment phase; it will take at least one more round of public opinion period before final implementation. The direction is very clear, but how exactly it will be articulated remains uncertain.

What truly determines the weight of this matter is not what Atkins said this month, but the coming weeks—whether the Clarity Act can successfully navigate the Senate and whether the safe harbor rule can be formally finalized before Peirce leaves. Which of these two countdowns finishes first will largely determine whether this round of the "America repatriation" narrative will be implemented or once again become a mere window of opportunity.