Galaxy Research Director Envisions New Crypto Regulations Providing Legal Path for Token Issuance in the U.S.

On August 21, Alex Thorn, the head of Galaxy Research, stated that the U.S. Securities and Exchange Commission (SEC) proposed the "Regulation Crypto Assets" (Reg Crypto) on August 18. This is the first set of securities rules specifically designed for the issuance and sale of crypto assets in the U.S., rather than simply applying traditional stock regulatory frameworks. The proposal could bring two significant changes to the U.S. crypto industry: first, it allows eligible token projects to legally issue tokens to the public, including non-accredited investors; second, it establishes a clear mechanism for formally terminating investment contracts related to tokens once conditions are met, thereby addressing the long-standing uncertainty regarding the securities status of many historical tokens.

According to the proposal, Reg Crypto will apply to crypto assets that "are not themselves securities but were issued or sold as part of an investment contract." The framework mainly consists of four phases:

Financing Phase: Two new categories of issuance exemption are introduced, including a startup exemption that allows projects to raise up to $5 million over a maximum of four years; a larger exemption similar to Regulation A allows for raising between $20 million and $75 million within 12 months.

Disclosure Phase: Issuers must disclose information more relevant to crypto assets, such as token supply, unlocking schedules, minting and burning mechanisms, governance rights, smart contract information, source code, and project development progress.

Construction Phase: Project teams can complete their core construction commitments to investors within the specified time frame.

Exit Phase: When a project completes or ceases its related construction obligations and submits a transition report, the investment contracts related to the tokens can be deemed terminated, and the tokens will no longer be subject to securities regulation under that investment contract.

Alex Thorn believes that the significance of Reg Crypto lies in its establishment of a "token lifecycle" regulatory framework for the first time, meaning that tokens may initially constitute investment contracts due to project construction commitments, but as the project matures, the securities status can be concluded through a clear process.

However, the rule is still in the proposal stage, and its final implementation faces challenges from regulatory changes, state regulatory agency challenges, and congressional legislative impacts. If ultimately passed, Reg Crypto could usher in a "legal version of ICO 2.0" in the U.S., establishing a new regulatory foundation for project financing, token circulation, and investor protection.

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