A late-coming reform, or a gesture that is better than nothing? Interpretation of the SEC's new token financing regulations.

Written by: Muyao Shen, Bloomberg

Translated by: Saoirse, Foresight News

"Better than nothing"

The U.S. Securities and Exchange Commission (SEC) is attempting to revive the once-thriving Initial Coin Offering (ICO) business. However, the bigger challenge lies in finding a buyer for a product that investors have long abandoned.

This proposal, released earlier this month, will reopen public token sales to American investors. Crypto startups will not need to complete the SEC's full registration and can raise up to $5 million per year, while large projects can raise up to $75 million annually. Compared to the regulatory crackdown following the 2017 ICO boom, this proposal represents a significant policy shift.

However, the current product environment and market are vastly different.

Nearly a decade ago, the wild growth of ICOs often only required a white paper, a crypto wallet, and investors willing to bet that the newly issued tokens would continue to rise. The proposed regulatory framework from the SEC comes with disclosure obligations and will incur considerable compliance costs.

Additionally, there is another layer of uncertainty: while the proposal simplifies the token financing process, the rules for trading after token issuance remain complex.

The speculative fervor that once fervently chased hundreds of new cryptocurrencies has now become highly selective. Bitcoin and a few leading tokens dominate most of the crypto market's attention; traders seeking higher and faster returns have turned to perpetual futures, prediction markets, and other products. Recently, some speculative funds have even flowed into AI-related stocks.

The regulatory focus is actually on issues that were more pressing several years ago: providing a legitimate path for legal crypto projects to raise public funds. Yet the market has already evolved beyond that.

Dragonfly Venture's general partner Tom Schmidt remarked on the shelved "CLARITY Act" in Congress: "This is clearly better than nothing, but if this Act had come out a few years ago, it would have been more valuable. What we need to address now is the issue that the CLARITY Act should have responded to, rather than the financing channels."

Declining Interest from Venture Capital in Token Trading

Since 2025, the scale of venture capital fund transactions related to tokens has significantly decreased:

The ICO model allowed crypto startups to sell newly minted tokens directly to investors, generally in exchange for cryptocurrencies like Bitcoin or Ethereum. During the industry's peak in January 2018, ICO financing peaked at about $3 billion in a single month. This boom was built on cheap capital, limited supply, and the market belief that "there would always be someone willing to buy any new coin at a high price." Ultimately, it collapsed under the impact of falling prices, regulatory lawsuits, project failures, and pump-and-dump schemes.

Signs of retreat are also visible among professional investors: the number of token trades by venture capital firms has sharply declined. Many leading venture capital firms have expanded their investment scope beyond the crypto realm to include artificial intelligence, robotics, and other frontier technologies.

ICO Financing Faces a Cliff-like Decline

Since the industry peaked in 2018, the number of ICO transactions has continued to decline:

The changing market landscape means that new tokens are now competing for capital not only against thousands of crypto assets but also against an increasing number of speculative categories that have better liquidity and clearer narratives.

Even so, some venture capital firms still view the SEC proposal as an important reset.

Winnie Lau, a partner at Strobe Ventures, said: "The market is in a consolidation phase, and this proposal makes me cautiously optimistic about the future development of digital assets in the U.S. This is a step in the right direction, providing early teams with a viable path to build token networks and raise funds and innovate in the U.S."

For projects that are not focused on meme coins and genuinely want to launch products, this regulatory change is particularly significant.

Cosmo Jiang, general partner and portfolio manager at venture capital firm Pantera Capital, stated: "In the past, the industry's situation was quite bizarre: issuing meme coins was legal, while creating tokens that could actually generate value was considered illegal, which is completely contrary to normal business practices."

This also corresponds to a far-reaching amendment in the proposal: tokens will not be permanently bound to the investment agreement at the time of issuance. Once the issuer completes or permanently ceases to fulfill the management and operational commitments promised to investors, the investment agreement can be terminated.

However, legalizing the issuance of utility tokens does not mean that the tokens themselves possess investment value.

The crypto market has yet to fully recover from the downturn last October; even if token prices have rebounded recently, investors are not willing to spend money simply because a project has associated tokens.

Carlos Guzman, a research analyst at investment firm GSR, stated: "ICOs in 2026 are no longer the same as those in 2018. The era of securing capital just with a white paper and imagination is over."

Rebounded Market

Even with the recent rise, gold has still outperformed Bitcoin this year:

Note: Data reflects asset price changes starting from 2025-12-31.

Bitcoin supporters have traditionally referred to it as digital gold and an inflation hedge, but this logic has not borne fruit this year. From 2026 to date, gold has risen more than 7%; Bitcoin, despite experiencing a rebound, is still close to a 10% decline this year.