US SEC Unveils Crypto Asset Regulations

The U.S. Securities and Exchange Commission (SEC) has announced new regulations for crypto assets. These regulations are significant because they express the SEC's position on the stagnant crypto asset issuance ecosystem and mark the first step toward the institutionalization of crypto assets. In particular, they provide clear standards for new issuance ecosystems and startups.

U.S. crypto asset regulation varies depending on whether the asset itself is classified as a security or a non-security. Even non-security crypto assets, such as digital goods, tools, and collectibles, fall under regulatory scrutiny if their sale meets the requirements of an investment contract. These regulations clearly define the circumstances under which the sale of such non-security crypto assets constitutes an investment contract.

This provides practical guidelines necessary for building the crypto asset ecosystem.

Fundraising limits and compliance requirements are specified for each track. Also included are conditions under which an investment contract can terminate after a certain period and upon satisfying specific criteria, offering a path for startups to raise funds and operate their businesses stably.

The U.S. is a federal nation, and specific regulations can vary by state, creating difficulties for businesses needing to acquire licenses in each state. These regulatory proposals include conditions under which separate state-by-state licensing work may not be required. This supports businesses in reducing the cost and time spent on acquiring state-specific licenses by establishing federal-level standards.

In the past, the ambiguity of regulatory rules for Web3 projects forced companies to prepare for unpredictable situations. However, these regulations explicitly define the rules companies must adhere to, increasing transparency and predictability. This enables companies to take necessary precautions in advance, reducing ex-post cost burdens and creating an environment for effective market entry.

These regulations introduce a system that effectively prevents potential side effects seen in past Initial Coin Offerings (ICOs). Simultaneously, they open up many practical aspects, such as airdrops, which Web3 companies need for full-scale business operations, thereby fostering a healthy ecosystem and supporting corporate activities.

These limits provide important criteria for projects planning their fundraising.

The existing Reg D regulation was primarily a closed structure targeting professional investors. However, the new structure proposed by the SEC allows for a model where token holders are also users of the service, meaning investors and users are not separated. This, combined with purchase limits based on individual and corporate annual income and assets, creates a foundation for a broader user base to participate in the crypto asset ecosystem.

They are expected to receive direct contributions and benefits. Furthermore, exchange infrastructure companies like Coinbase and custodian service providers are also expected to benefit significantly, gaining more active business opportunities in the new regulatory environment.

The current SEC 'Regulation Crypto' primarily targets 'non-security' crypto assets. Therefore, tokens based on Real-World Assets (RWA) do not fall within the scope of these regulations. This suggests that RWA tokens may be managed under a separate regulatory framework or existing financial regulations.

If an airdrop is given as compensation for specific contributions, it can be considered a form of investment receipt. Therefore, the content of contributions for airdrops must be assessed at fair value and included within the $5 million limit. This means that airdrops are also viewed as a form of investment and must adhere to transparent reporting procedures.

This movement is likely to accelerate further in the future. This will create opportunities for new business models, such as issuing tokens and rewards to U.S. users.

This will likely lead to a concentration of fund flows towards U.S.-based custodian companies. Consequently, exchanges and custodians are expected to emerge as major beneficiaries of this regulatory change.

The current SEC regulations are not yet finalized, and some controversy exists, particularly regarding regulations 400 and 500. The public comment period is open until October 20, meaning the content could change significantly afterward. Even after being listed in the Federal Register, there remains a possibility of adjustments if they conflict with other laws.

In the past, many crypto projects found it difficult to build in Korea and moved to Singapore, Abu Dhabi, and other locations. However, the SEC's new regulations make the U.S. regulatory environment clearer and more predictable, potentially making it an attractive starting point for overseas crypto founders. This could accelerate the influx of crypto projects into the U.S.

These regulations specify the conditions under which a token with the nature of an investment contract can exit the investment contract track and transition its positioning as a commodity, provided certain conditions are met. Once the investment contract terminates, the token fully converts into a commodity. This process mandates disclosure obligations and the fulfillment of development promises, serving as a safeguard for investor protection. Through this, projects can escape securities law regulation and establish themselves in the market as commodities.

The realm of crypto asset investment, once accessible only to professional investors, is now opening up to general investors. These regulations set investment limits based on income or salary levels, thereby improving access for general investors to promising projects while simultaneously protecting investors. This is expected to promote the democratization of investment and encourage healthy market participation. By opening the market while establishing safeguards for investor protection, a balance is struck to allow more people to participate in the crypto asset market.