Comments close on the SEC’s Regulation Crypto Assets, with Hyperliquid, Bitwise and Wall Street groups asking for changes

Summary

The public comment period on the SEC’s proposed Regulation Crypto Assets closed Tuesday, with more than 100 submissions filed, The Block reported, as crypto firms, Wall Street groups and critics weighed in on how the agency should regulate token offerings.

The proposal includes a “startup exemption” for offerings of up to $5 million and a “fundraising exemption” for up to $75 million over one year, plus a conditional safe harbor for tokens tied to investment contracts, according to The Block and Cointelegraph.

The Hyperliquid Policy Center backed adopting the rule but said the safe harbor is too limited and asked the SEC to codify that airdrops given for nothing in return are not securities, while Bitwise asked for a clear standard managers can use to tell whether a token is a security from “publicly available information,” the outlets reported.

Not everyone wants it revised: former SEC enforcement official John Reed Stark and Duke’s Lee Reiners urged the SEC to withdraw the proposal, arguing it exceeds the agency’s authority and weakens investor protection, Cointelegraph reported.

The SEC will now review the comments before deciding whether to revise, adopt or withdraw the proposal; it has not set a timetable, and any final rule needs a commission vote, according to Cointelegraph.

Key facts

• Hyperliquid also warned the proposal “fails to provide clarity” on whether unregistered intermediaries can facilitate token trading or whether tokens can trade freely through onchain protocols, Cointelegraph reported. (Cointelegraph)
• Bitwise asked when managers can rely on an issuer’s proposed Form TR filing, which would certify that an investment contract has ceased to exist, according to Cointelegraph. (Cointelegraph)
• The Alternative Investment Management Association asked for disclosures explaining investors’ legal rights and said issuers should distinguish “utility or economic exposure from ownership, redemption, cash-flow and contractual rights,” The Block reported. (The Block)
• SIFMA, commenting on the SEC’s separate five-year innovation exemption for tokenized-stock venues, said investor-protection questions need to be resolved at the outset, The Block reported. (The Block)
• Stark and Reiners warned that adopting the rule in roughly its current form would invite an immediate legal challenge, according to Cointelegraph. (Cointelegraph)