CoinWResearch Institute
Recently, the U.S. Securities and Exchange Commission (SEC) formally proposed a rule for "Regulation Crypto Assets," intending to establish a dedicated framework for issuance, financing, and information disclosure related to specific investment contracts involving crypto assets. The two most notable figures in the market are $5 million and $7.5 million. According to the proposal, smaller projects can raise no more than $5 million cumulatively over four years; larger projects can raise up to $7.5 million within 12 months but will face stricter financial disclosure and ongoing reporting obligations. At the same time, the SEC proposed a conditional "Investment Contract Safe Harbor." It is important to emphasize that this rule is currently just a proposal and has not officially taken effect. However, beyond the two funding amounts themselves, what is more noteworthy is the shift in the SEC's regulatory approach: the U.S. is attempting to answer a question that has troubled the crypto industry for many years: How should an early crypto project raise funds through token-related arrangements in compliance with regulations?
1. $5 million and $7.5 million: SEC has designed two paths for Crypto financing
In the past, crypto projects in the U.S. often faced an awkward problem: a project might only wish to raise funds to develop a network or product, but once token sales are tied to the team's future development commitments, it could involve "investment contracts," thus falling under the jurisdiction of securities law. "Regulation Crypto Assets" seeks to establish a more targeted system for these situations. The first path is the Startup Exemption, allowing qualifying projects to raise up to $5 million cumulatively over four years. The SEC clearly states that this mechanism mainly targets smaller, early-stage projects to mitigate the high compliance costs they might face under traditional securities issuance methods. The second path is the Fundraising Exemption, allowing qualifying projects to raise up to $7.5 million every 12 months. The limit is significantly higher, but regulatory requirements also increase, including the provision of financial statements and compliance with ongoing disclosure obligations. Neither scheme involves "zero disclosure token issuance." The SEC requires issuers to provide principles-based information disclosure to investors, including important information about the project, crypto assets, related networks and applications, key personnel, and issuance arrangements. Smaller projects obtain a relatively lighter compliance financing path, while larger projects can raise more funds but must provide greater transparency in return.
2. The real change: Moving from "Is the token a security?" to "How to raise funds in compliance"
One of the most frequent questions in U.S. crypto regulation over the past few years has been: Is this token a security? However, this proposal actually advances the discussion. The SEC distinguishes between "Crypto Asset" and the associated "Covered Investment Contract." Simply put, a token itself may not necessarily be a security, but if an investor buys it primarily because they expect the team to develop the network, operate the project, and create value in the future, then the transaction arrangement formed around this financing could still constitute an investment contract. This signifies that the regulation is beginning to attempt to separate the discussion of the "token itself" from the "act of financing through the token." The SEC also clearly states that the new framework hopes to reduce financing costs for crypto projects while protecting investors and diminishing the incentive for issuers to choose offshore issuance and operations due to the inadequacy of the U.S. regulatory framework. SEC Chairman Paul Atkins described it as providing a clearer path for crypto entrepreneurs to raise funds under U.S. securities law. The U.S. is gradually moving from primarily relying on traditional securities law to determine whether crypto is non-compliant, to designing a financing system that can be practically adhered to.
3. Why is $5 million worth noting? It may already cover a large number of early projects
Although $5 million may not seem like a particularly large number, within the context of the real financing structure in the crypto primary market, its significance becomes markedly different. According to ChainCatcher citing RootData's statistics, among the 3,244 crypto projects with financing records spanning no more than four years and ascertainable funding amounts, 1,617 projects had cumulative financing amounts not exceeding $5 million, accounting for 49.8% of the sample; the sample's median financing amount was approximately $2.5 million, with nearly 96% of projects having completed only one round of financing. This implies that if the final rule is enacted, the $5 million Startup Exemption is not merely prepared for a minuscule number of micro-teams but could, in fact, encompass a significant portion of early crypto projects' financing scales. Many early teams in fields like DeFi, infrastructure, gaming, and AI x Crypto do not necessarily require tens of millions of dollars in a single financing round. The past issue was that if financing was conducted under the traditional securities issuance system, costs for lawyers, auditing, registration, and ongoing disclosures could be excessively burdensome for small teams; conversely, if they financed directly through tokens, they might face regulatory uncertainties. The SEC has acknowledged that traditional public offerings could be prohibitively costly for small issuers, hence the Startup Exemption aims to provide a lower-cost financing channel for these early teams. However, just because financing becomes easier does not mean that project quality will automatically improve. Among the 3,244 projects in the sample, about a quarter have already ceased operations. This also explains why the SEC, while lowering financing thresholds, has not eliminated information disclosure, anti-fraud, and related investor protection requirements.
4. More important than $7.5 million might be the "safe harbor"
Focusing solely on the two funding limits of $5 million and $7.5 million could lead to missing a more significant institutional change in this proposal: the Investment Contract Safe Harbor. This mechanism aims to address a long-standing challenge in the crypto industry: can a token be related to a security-like investment contract in the early stages of a project, but gradually detach from that status as the network matures? A simple example: when a blockchain project is just established, investors purchasing the associated token are likely betting on the founding team's future development of the network. At this point, project value heavily relies on the team's subsequent technical development and operational actions, so the relevant transaction arrangements may involve investment contracts. However, years later, if the network is online, core functions are completed, users can independently use the network, and the token begins to perform actual functions like paying gas fees, participating in network governance, or using applications, then the relationship between it and the initial team's financing commitments may have undergone changes. The safe harbor mechanism proposed by the SEC this time is an attempt to handle this lifecycle change. If specific conditions are met, the relevant crypto assets could be viewed as no longer bound by investment contracts. The SEC specifically points out that when issuers have completed or permanently stopped key management work previously committed to, relevant safe harbor provisions may apply. The regulatory logic behind this is worth noting. The market has been accustomed to discussing a static question: "Is this token a security?" Regulatory discussions may increasingly shift toward dynamic questions: "What stage of the project lifecycle is this token currently in? Are investors still relying on the issuing team to fulfill key commitments?" If this mechanism ultimately becomes part of the formal rules, the regulatory logic surrounding crypto assets could undergo deeper changes as a result.
5. The change is not "easier token issuance," but "compliant token issuance is starting to become feasible"
From an industry perspective, the most significant impact of "Regulation Crypto Assets" is not simply lowering the token issuance threshold, but rather attempting to establish a third path between traditional securities registration and complete offshore issuance. For early projects, the $5 million Startup Exemption may lower the cost of entering the U.S. funding system; for projects that already have a certain scale, the $7.5 million Fundraising Exemption provides a broader financing space, but simultaneously requires financial statements and ongoing disclosures. This creates a very clear exchange relationship: larger financing amounts come with higher transparency requirements. For exchanges and investors, this may also usher in new changes. In the future, when evaluating a crypto project, in addition to the team, financing, tokenomics, products, and on-chain data, the regulatory framework through which the project is issued, the information disclosed, and compliance with safe harbor conditions may gradually become new dimensions of project risk assessment.
In the long term, this may push crypto financing from a previously relatively vague "token sale" model to form a more KPI-structured system closer to capital markets: small teams can initiate at low costs, growing projects assume higher disclosure obligations in exchange for larger financing space, while networks that have completed core development will have opportunities to clarify legal relationships between tokens and early investment contracts. Of course, all these changes currently hinge on an essential premise: "Regulation Crypto Assets" is still in the rule-making stage and not yet implemented as legal rules. The final version of financing amounts, disclosure requirements, safe harbor conditions, and applicable scopes may still adjust based on public opinion. However, the direction is already noteworthy. One of the most challenging issues in U.S. crypto regulation has been that projects often know "what they cannot do" but struggle to understand "how to do it in compliance." This time, the SEC is beginning to attempt to provide an answer to the latter part. The U.S. is trying to bring crypto financing from a regulatory gray area into an executable, disclosable, and sustainable institutional framework. For the crypto industry, the next stage of change may not be that issuing tokens becomes easier, but that compliant token issuance begins to be genuinely feasible for the first time.
6. Financing threshold lowers, but project risks won't vanish
The new financing framework does not imply that the investment risks of crypto projects will concurrently decrease. The $5 million Startup Exemption lowers financing costs for early projects, but it may also allow more projects with unverified products and business models to enter the market. Meeting exemption criteria only indicates that the project adheres to specific issuance rules and does not guarantee SEC endorsement of the project's quality; therefore, the project team, tokenomics, and actual products must still be assessed by investors. Furthermore, although the $7.5 million Fundraising Exemption requires financial statements and ongoing disclosures, crypto projects involve information that traditional financial reports may struggle to fully cover, including token unlocks, foundation assets, on-chain funds, protocol revenues, and related wallets, so actual disclosure quality remains to be observed. In addition, although the safe harbor attempts to address the regulatory identity of tokens at different development stages, boundaries such as "when the team has completed key management work" and "to what extent the network must develop to detach from investment contracts" could still generate new controversies. Therefore, easier financing does not equate to a safer project, and a clearer regulatory path does not necessarily mean the project itself is more worthwhile to invest in. This SEC proposal still retains anti-fraud and anti-manipulation requirements under federal securities laws, reflecting regulators' effort to balance reducing financing costs while protecting investors.
7. Looking globally: Can the SEC's new rules repair the crypto primary market?
Viewing the SEC's proposed Regulation Crypto Assets within the global regulatory framework, its most distinct feature is not that "the U.S. has finally started regulating crypto," but rather that it attempts to provide early projects with a long-missing public financing path. The EU's MiCA approach resembles "clarifying first, then issuing publicly." According to the "Markets in Crypto-Assets Regulation" (Regulation (EU) 2023/1114, referred to as MiCA), when a project issuer publicly offers a crypto asset or applies to list a token on an exchange, they generally need to prepare a crypto-asset white paper that discloses information related to the issuer, project, token rights, technical mechanisms, risks, and environmental impact, and notify supervisory authorities. Hong Kong and Singapore lean toward more cautious regulation. Hong Kong mainly follows the "Securities and Futures Ordinance" (SFO, Cap.571) and the "Anti-Money Laundering and Counter-Terrorist Financing Ordinance" (AMLO, Cap.615): if a token constitutes securities, it falls under securities regulation; centralized virtual asset exchanges operating in or marketing to Hong Kong investors require SFC licensing.
Singapore manages various types of tokens through the "Securities and Futures Act" (SFA), MAS's "Digital Token Offerings Guide," and the "Payment Services Act" (Payment Services Act 2019): if a digital token is categorized as a capital market product, it is regulated according to securities, collective investment schemes, or derivatives rules; if it involves digital payment token services, it falls under licensing and conduct regulations for payment service providers. The UK is incorporating issuance disclosures, entry trading, and market abuse into a new cryptoasset regime through the "Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026" and FCA's A&D (Admissions and Disclosures)/MARC (Market Abuse Regime for Cryptoassets) rules. Dubai's VARA regulates virtual asset issuance based on Dubai Law No. (4) of 2022, the Virtual Assets and Related Activities Regulations 2023, and the Virtual Asset Issuance Rulebook; some issuances require VARA permission, and issuers must publish white papers and risk disclosure documents before issuance. In contrast, the SEC directly addresses the pain points in the crypto primary market: can early projects comply with fundraising, token issuance, and network launches in the U.S.? The significance of the $5 million Startup Exemption and the $7.5 million Fundraising Exemption lies here. It is not just about relaxing regulation; it seeks to pull token financing from the previous gray area back into a structured framework with limits, disclosures, and anti-fraud constraints.
From the industry's response, crypto VCs, CEXs, and entrepreneurs have an overall positive but not unconditional outlook. For VCs, the biggest issue in the past was the lack of unified rules governing project financing, token issuance, unlocking, market making, and listing. The primary market buys in at low prices, and the secondary market enjoys high FDV, ultimately leaving retail investors facing illiquid, high-valuation, and long-unlocking assets. This game has severely eroded trust in the previous cycle. VCs need new compliant exit paths and clearer disclosure standards to reduce legal risks. For CEXs, the issue is more practical. The biggest fear for exchanges is not regulation itself, but uncertainty about which assets can be listed and which assets will later be retroactively classified as securities. If the SEC establishes an executable issuance and status conversion mechanism, it would theoretically provide CEXs with clearer judgment bases regarding asset entry, information disclosure, liquidity arrangements, and secondary trading. However, this also means that exchanges can no longer rely solely on popularity, market making depth, and community buzz to filter projects; they may have to bear stronger pressures for information verification and ongoing disclosures. For entrepreneurs, the value of the $5 million lightweight issuance is that it may allow small teams not to rely on high-valuation private placements, complex SAFT structures, or gray narratives from the start. However, it will also raise the entry barrier for entrepreneurship: teams will need to address disclosure, financial, legal responsibilities, and investor communications sooner. If the rules are enacted, the path of "issuing tokens first and then making up stories" will become more challenging, but the path of "disclosure first, followed by financing and delivery" will become clearer.
The previous primary market practices in the crypto world have indeed collapsed institutionally. The issue is not solely that some projects have done wrong, but the old structure itself encourages information asymmetry: project parties inflate valuations with narratives, VCs enter at low prices, CEXs sustain hype through liquidity, and retail investors ultimately face high FDV, low liquidity, long unlocking times, and opaque expenditures. The market is not devoid of funds; it increasingly distrusts this game as capable of fair pricing. The SEC's new rules may repair part of it, but not all. It can address the "lack of compliant entry": enabling early projects to understand how to publicly finance, how to disclose, and how to escape the status of investment contracts in the future. However, it cannot resolve all incentive problems. Token economics design, unlocking rhythms, market making arrangements, exchange entry requirements, and genuine user demand will still need market and regulatory interactions to navigate. Therefore, if this proposal is ultimately enacted, it will mark the beginning of a new round of filtering. The projects that can survive in the future will not just be those that are good at storytelling, fundraising, and generating hype, but those that can clearly explain financing rules, information disclosure, real products, and long-term token value all on the same table.
References
1.https://www.sec.gov/files/rules/proposed/2026/33-11434.pdf
2.https://www.sec.gov/newsroom/press-releases/2026-76-sec-proposes-new-regulation-crypto-assets
3.https://www.chaincatcher.com/article/2284066
5.Hong Kong SFC VATP Licensing
7.Singapore MAS Digital Token Offerings Guide
9.Dubai VARA Virtual Asset Issuance Rulebook
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