SEC Proposes "Regulation Crypto Assets," Opening Two Fundraising Pathways for Token Projects
The U.S.
The U.S. Securities and Exchange Commission on Tuesday proposed its first formal crypto-specific rulemaking under the Trump administration, creating a two-tier exemption structure that would let token issuers raise capital without full SEC registration and offering DeFi protocols a conditional exit from securities classification.
The proposal, formally titled "Regulation Crypto Assets," was released August 18 and caught much of the industry off guard. Four days earlier, the SEC had cancelled a scheduled public vote on the same framework with no explanation, issuing the cancellation via a Sunshine Act notice. Because the Sunshine Act process normally accompanies stated rationale for procedural changes, the absence of any explanation made the withdrawal unusual. The August 18 release came not through a formal commission vote but via a commissioner statement, which CoinDesk described as a "surprise" given the prior cancellation. A 60-day public comment window opens upon Federal Register publication, and final rules are not expected before early 2027.
What the Proposal Actually Does
The framework establishes two capital-raising pathways for crypto projects operating under U.S. securities law. The first, a startup exemption, allows token offerings of up to $5 million across a four-year window with no full registration requirement, though issuers must provide narrative disclosures to investors. The second, a fundraising exemption, raises that ceiling to $75 million per 12-month period but adds requirements for audited financial statements and ongoing compliance reporting.
Beyond fundraising, the proposal includes a safe harbor provision for token issuers. Under its terms, a token can exit its classification as an "investment contract" (the legal category that brings it under SEC oversight) once the issuing team has completed or permanently ceased all essential managerial efforts and governance has sufficiently decentralized. For DeFi protocols specifically, lending platforms, automated market makers, and yield aggregators are explicitly exempted from registration requirements, provided they meet defined decentralization thresholds.
SEC Chair Paul Atkins framed the proposal as a practical fix to a longstanding problem. "Regulation Crypto Assets seeks to provide crypto asset entrepreneurs and market participants with clear pathways to raise capital under the federal securities laws," he said in his statement. The agency's official language described the framework as "a comprehensive, tailored securities offering regime intended to address long-standing barriers to responsible capital formation and innovation within domestic crypto asset markets, while preserving the investor protections at the core of federal securities laws." The proposal also explicitly seeks to preempt certain state-level securities requirements and reduce incentives for offshore incorporation, two policy goals with direct practical significance for U.S.-based founders and legal advisers.
Why Now, and What Came Before
The proposal does not arrive in a vacuum. Under former SEC Chair Gary Gensler, the agency pursued an enforcement-first approach to crypto regulation, declining to issue sector-specific rules and instead bringing securities lawsuits against exchanges, token issuers, and DeFi protocols. That posture drove significant capital formation offshore to Singapore, the UAE, and EU-regulated venues. The Trump administration, which took office in January 2025, has moved steadily toward formal crypto regulation as a departure from that approach.
Congress passed the GENIUS Act in July 2025, establishing the first federal framework for dollar-backed stablecoins, with implementing rules due by July 2026. In March 2026, the SEC and CFTC jointly classified 16 major tokens, including Bitcoin and Ether, as digital commodities, placing their spot markets under CFTC rather than SEC jurisdiction.
The more immediate trigger is a legislative stall. The Digital Asset Market Clarity Act (CLARITY Act), which passed the House in July 2025 with a 294-to-134 bipartisan majority, failed to advance in the Senate before its August recess. With Congress sidelined, the SEC moved to fill the gap through administrative rulemaking.
The market backdrop is cautious. Bitcoin was trading near $63,081 as of August 16, 2026, roughly half its October 2025 peak of approximately $126,000. On-chain data from early August showed the MVRV ratio (a measure comparing market value to the average cost basis of all coins) at 1.21 and SOPR (a metric indicating whether holders are selling at a profit or loss) near 1.0. Both figures suggest the market is sitting close to breakeven for short-term holders, a historically cautious but not bearish signal.
The View from Outside the United States
For crypto founders and developers based outside the U.S., the proposal has a clear practical implication: raising money from American investors just got more accessible, at least in principle. The $5 million startup exemption in particular could serve as a viable early-stage route for Web3 projects in South Asia and Africa that previously routed corporate structures through Singapore, the Cayman Islands, or EU jurisdictions to avoid U.S. enforcement risk.
Pakistan is among the most directly positioned to benefit. The country enacted the Virtual Assets Act 2026 in April, converting a temporary ordinance into permanent law and creating the Pakistan Virtual Asset Regulatory Authority (PVARA). The Pakistan Crypto Council is now active under this framework, and the legislation explicitly cited U.S. pro-crypto policy as a factor in Pakistan's regulatory pivot.
In Africa, South Africa's Financial Sector Conduct Authority (FSCA) approved 300 Crypto Asset Service Provider (CASP) licenses by December 2025, a 59% approval rate among applicants, under its own regulatory framework. Nigeria, where over 10% of the population holds crypto assets (one of the highest ownership rates globally), has struggled to advance a clear token classification standard. The SEC's approach to distinguishing investment securities from decentralized protocols could provide a template for regulators in Lagos and Nairobi who are navigating similar definitional disputes.
India is watching the proposal closely but moving cautiously. The country's 30% flat tax on crypto gains remains unchanged, and the Reserve Bank of India continues to oppose crypto legalization. The Securities and Exchange Board of India faces growing industry pressure to clarify token classification standards, but no formal policy shift appears imminent. As one of the world's largest retail crypto markets, India's ultimate regulatory posture will carry significant weight for the region.
The DeFi decentralization threshold, in particular, is drawing attention beyond U.S. borders. Fourteen non-EU countries have already adopted frameworks aligned with Europe's Markets in Crypto-Assets regulation. Analysts suggest the SEC's decentralization test may become a parallel global reference point, though no formal adoption process has begun in any jurisdiction.
What Comes Next
The 60-day comment window is open to anyone, including developers, DAO participants, and industry groups outside the United States. Submitting comments is standard industry practice and directly influences final rule language, making engagement a concrete mechanism for shaping the framework rather than a formality. Regional Web3 communities in Karachi, Bengaluru, Lagos, and Nairobi that want to shape the final language have a direct mechanism to do so. If the SEC proceeds on its current timeline, final rules would arrive in early 2027, giving the industry roughly a six-month window to engage before the framework is locked in.