A securities crowdfunding OG has submitted a comment letter to the Securities and Exchange Commission (SEC) on its proposed rule, Regulation Crypto Assets.
The SEC has leveraged existing securities exemptions, Reg CF and Reg A, to guide the proposed rules and provide compliant options for entities raising funds through crypto offerings. Both Reg CF and Reg A exemptions were created or updated under the JOBS Act of 2012, the legislation that enabled online capital formation.
Regulation Crypto Assets, proposed last month, is accepting feedback from interested parties before the rule goes into effect. The proposal’s headline is the creation of exemptions for crypto issuers to raise funds online.
The first is a one-time exemption for startups that would permit offerings of up to $5 million during a four-year period. The second exemption would permit offerings of up to $75 million during each 12-month period. For both exemptions, an issuer would be required to make principles-based disclosures. For the second exemption, which has the $75 million funding cap, issuers would need to file financial statements alongside ongoing reporting.
Existing platforms in the online capital formation sector are expected to quickly incorporate these crypto exemptions, once they become actionable, to serve a wider range of firms seeking growth capital.
Kim Wales, one of the founders of the CrowdFund Intermediary Regulatory Advocates (CFIRA) – an entity that led the charge for securities crowdfunding, which is now defunct- submitted her feedback on Reg CA, drawing parallels to the JOBS Act and her experience in crafting new rules. Wales is also the founder of Crowdbureau, an adjunct professor, and a corporate director.
Wales’s deep engagement with the JOBS Act makes her perspective valuable. She addresses investor limits, secondary trading and other aspects of the proposal.
The comment letter is shared below.
One area Wales nails is that the rest of the world is watching closely how the US will manage crypto offerings. While rules have already been established in multiple jurisdictions, what the US decides will help guide future changes as the industry evolves.