SEC Proposes Four-Year Financing Window for Tokens, Transparency is the Boundary of Financing Freedom
The U.S. Securities and Exchange Commission (SEC) has released proposed rules for "Regulation Crypto Assets," aiming to establish two types of registration exemptions and conditional safe harbors for investment contracts involving crypto assets; the rules are not yet in effect and are entering a public comment period.
The startup exemption allows issuers to raise up to $5 million in a one-time offering within four years, requiring the submission of principle-based disclosure documents before and after issuance, detailing the project, team, technology, token mechanics, risks, and key management tasks to be completed; this path does not require audited financial statements.
The financing exemption allows eligible issuers to raise up to $75 million every 12 months, but they must provide financial statements and bear ongoing reporting obligations; both types of exemptions are subject to federal securities laws' anti-fraud and anti-market manipulation provisions and do not constitute a comprehensive exemption for token issuance.
The rules also propose a safe harbor for investment contracts: if issuers complete or permanently cease their previously committed "key management tasks," and meet conditions while submitting proof to the SEC, the related crypto assets may decouple from the original investment contract and no longer fall under the securities regulatory framework due to that contract.
The SEC adopts a "principle-based" disclosure approach rather than rigid uniform forms, intending to allow different token projects to disclose key facts according to their own structures; however, issuers must still clarify what tasks investors rely on the team to complete, how the tokens operate, how the raised funds will be used, and the substantive risks faced by the project.
In market mechanisms, early protocol teams will become direct buyers under the $5 million exemption, with financing funds flowing from retail and accredited investors to token network development; large-scale projects may shift to the $75 million annual channel and exchange ongoing disclosures for higher fundraising limits. The safe harbor reduces legal uncertainty regarding whether tokens remain securities after project completion, benefiting compliance, auditing, token disclosure, and issuance infrastructure; projects relying on regulatory ambiguity or lacking verifiable development commitments will face pressure.
Source: Public Information
ABAB AI Insight
During the 2017 ICO boom, many projects sold tokens based on white papers and future development commitments, leading to the SEC suing Telegram over its Gram issuance in 2019 and Ripple in 2020, with core issues involving whether token sales constituted investment contracts. Previously, regulation mainly delineated boundaries through enforcement and case litigation; this proposed rule attempts for the first time to separate early token financing, scaled financing, and the exit from securities attributes into predefined paths.
The capital path is divided into two segments: small networks can raise product and network startup funds through the $5 million, four-year term; issuers with existing disclosures and financial capabilities can finance according to the $75 million annual cap. Funds will no longer be limited to traditional equity financing or high-cost registered offerings entering agreements, with lawyers, auditing firms, on-chain issuance tools, KYC, and ongoing information disclosure services becoming beneficiaries of the new financing channels.
This can be compared to the tiered financing under Regulation A of U.S. securities law, and is similar to the 2012 JOBS Act's institutional design for crowdfunding and emerging growth companies: regulators exchange fundraising caps, information disclosure, and investor protection for lower issuance thresholds. The difference is that crypto project assets will continue to circulate in secondary markets, and the development work promised by teams may directly determine token value, thus the safe harbor sets "completion of key management tasks" as a condition for exiting securities attributes.
Essentially, regulatory changes drive the standardization of financing structures. The core risk of past token issuance was "raising funds first, then being retrospectively identified as unregistered securities"; the proposed rules transform this uncertainty into fundraising limits, disclosure obligations, development timelines, and exit conditions. If the rules are ultimately passed, capital will preferentially flow to teams willing to accept transparent disclosures, capable of proving technical delivery, and possessing decentralized paths, rather than projects that rely solely on exchange listings and narratives to complete financing.
ABAB News · Law of Cognition
The boundary of financing freedom is information transparency.
White papers can raise funds, but delivery can avoid risk.
Regulation does not eliminate innovation, it only re-prices risk.