Blockchain Association: Supports SEC's Crypto Asset Regulation Proposal but Suggests Raising Exemption Limits
The Blockchain Association submitted a letter to the U.S. Securities and Exchange Commission (SEC), supporting the overall direction of the Regulation Crypto Assets proposal, which aims to exempt certain crypto investments from full securities registration. However, it believes the proposal needs significant refinement to be clearer and more applicable to decentralized and early-stage projects.
The Association recommends raising the startup exemption limit from $5 million to $10 million and the financing exemption limit from $75 million to $150 million; it also advocates for airdrops and network rewards to be excluded from the limits and allows on-chain transparency to replace audited financial statements.
The Association emphasizes the need for objective yet flexible standards to determine when the core management efforts of issuers end and when a network achieves "functionality"; it suggests establishing a third-party safe harbor for existing tokens to avoid imposing liability on third-party activities beyond the control of issuers.
The Association also calls for clear objective decentralization standards for tokens to escape the attributes of investment contracts (such as open-source code and no unilateral review rights), reinforces the priority of federal regulations over state legislation, and supports 24/7 trading on exchanges and self-custody.
The letter points out that the current $5 million limit may be quickly exhausted due to airdrops and incentive distributions, which is detrimental to capital formation; the Association represents over 100 member companies, including developers, infrastructure providers, and exchanges.
The SEC proposal was introduced in August, with the comment period ending on October 20, but the committee stated it would continue to accept comments after the deadline; the Association believes the proposal is an important step towards adapting regulations but still needs adjustments to unleash U.S. innovation while maintaining investor protection.
In terms of market mechanisms, industry opinions are feedback-driven in the rule-making process, and funding and projects may adjust their issuance structures before the final rules are determined; beneficiaries are early and decentralized projects seeking higher exemption limits and clearer safe harbors, while those under pressure are issuers needing to meet higher disclosure or U.S. affiliation tests.
Source: Public Information
ABAB AI Insight
The Blockchain Association, representing over 100 crypto companies, has long advocated for clearer rules through comment letters, litigation, and policy advocacy. It has previously submitted comments on Reg NMS revisions, tokenized securities, and stablecoin regulations; this feedback on Regulation Crypto Assets continues its path of transforming the challenges of applying the Howey test into specific exemptions and safe harbors.
The capital pathway aims to lower compliance costs and funding thresholds for early projects by raising exemption limits, excluding airdrops from counts, and allowing on-chain transparency to replace audits. The motivation is to enable more decentralized and startup projects to secure funding and network guidance within the U.S., while using objective standards to replace vague judgments, thereby reducing the chilling effect of enforcement uncertainty on capital formation.
This is similar to historical industry feedback on Reg A and Reg D limits or early debates on the applicability of securities issuance rules to the internet; the current phase is administrative rule-making, with congressional legislation yet to be completed, and industry opinions are influencing the final text's limits and scope.
Essentially, this represents regulatory changes and industry chain restructuring: by using exemptions and safe harbors, some token issuances are shifting from full registration to conditional pathways, with mechanisms to expand limits and clarify decentralization standards to reduce entry friction, allowing projects that meet disclosure and objective standards to gain funding ease, while those unable to adapt still face existing constraints or may shift to other jurisdictions.
ABAB News · Cognitive Law
The exemption limit determines how far early projects can go.
Including airdrops in the limits will squeeze capital formation space.
Objective standards can unleash innovation better than vague tests.