Author: Conflux

On August 19, Beijing time, Paul Atkins, the Chairman of the U.S. Securities and Exchange Commission (SEC), announced the draft of the Regulation Crypto Assets, which allows startups to raise up to 5 million dollars within four years, while larger projects can raise 20 million or 75 million dollars every 12 months without going through the complete securities registration process.

At the same time, the White House is also simultaneously supporting this policy direction. In the early hours of August 20, Trump met with the chairmen of the SEC and CFTC as well as executives from Coinbase, Nasdaq, and other crypto and traditional finance sectors, urging Congress to advance the CLARITY Act again. As legislative delays continue in Congress, the U.S. government is prepared to establish rules for the issuance and financing of crypto assets through administrative regulation. Market sentiment has begun to improve.

The true significance of this draft is not how much the limits have been relaxed, but how it has transformed a framework of judgment: in the past, whether a token could escape securities characteristics was often judged based on the Howey Test, public commitments made by the project team, and whether the network had sufficient functionality and decentralization. Now, the SEC has formalized this judgment further — what you promised when you sold the tokens, whether those promises have been fulfilled or permanently ceased, is for you to declare and prove, while the SEC retains the power to challenge afterward.

Who decides when to “graduate”

The new draft sets up an Investment Contract Safe Harbor mechanism. The specific process is: the project team completes or permanently ceases the previously promised "essential managerial efforts," makes no new relevant commitments, then submits a TR form (Form TR, a self-certification declaration document), certifying that it has met the conditions, along with supporting analysis for this judgment.

A key point is that submitting the TR form does not mean prior approval by the SEC. The SEC will not approve or release each declaration by the project team individually but retains the power to reassess and challenge the certification at a later time.

This means that the initiative has not simply shifted from "market consensus" to the SEC; rather, it has transformed from past vague judgments surrounding decentralization, functionality, and management efforts of the project team into a formalized framework of “issuer self-certification, SEC post-supervision.” The SEC does not grant "graduation certificates" to projects; it stipulates how the project team must prove it has graduated and who is responsible if a mistake is proven.

This distinction may seem technical, but it determines the nature of the entire set of rules: the power concentrated in the hands of regulatory agencies is not prior approval authority but post-challenge and enforcement authority.

Who can “graduate” faster

The most obvious beneficiaries are mature teams capable of "talking less and handing over quickly." Corporate securities lawyer Gabriel Shapiro pointed out that whether tokens can shed investment characteristics is directly tied to the commitments publicly made by the project team — the fewer promises made, the less work needs to be proven as completed or ceased, and the faster the exit from the safe harbor.

Rule 103 of the draft requires the project team to disclose what they promised to do, what the "essential managerial efforts" are, to what extent they have been achieved, and how the development plan and progress are. In the future, these disclosures will become important criteria for judging whether investment contracts have ended. The more management commitments the team makes during the fundraising phase — promising to achieve a certain key function, establish a certain network mechanism, push the ecosystem to reach a certain maturity — the more they will need to prove these promises have been fulfilled or permanently ceased in the future.

If these rules are ultimately implemented, if projects wish to legally raise funds from U.S. investors, the value of local issuance, compliance, and trading infrastructure in the United States will rise. The financing exemption mechanism in the draft explicitly requires the issuing entity to be registered in the United States, with the majority of executives being U.S. citizens or residents, more than half of assets located within the U.S., and the business primarily conducted in the U.S. This set of rules aims to reclaim the issuance and financing activities that have flowed outside the U.S. in recent years.

Conversely, the situation becomes more complicated for issuers who rely on "decentralized narratives" to package projects while maintaining actual control within the team. If they had previously presented pushing for network decentralization as a key managerial commitment that investors could rely on, then even if the mainnet has launched and the product is available, they may still need to prove this commitment has been fulfilled or permanently ceased to enter the safe harbor.

Free airdrops also have prices

Another easily overlooked detail in the draft is that the exemption mechanism for startups defines "covered transactions" to explicitly include non-cash distribution methods such as airdrops and network rewards. This means that even if tokens are distributed "for free," their value may still count towards the $5 million exemption limit — airdrops do not automatically exclude from financing limits.

For activities exchanging future token distributions for points through trading, contributing liquidity, and so on, whether and how these count towards the limit depends on the specific distribution structure and applicable rules, and cannot simply be equated to "this type of distribution necessarily constitutes investment terms." This has led some market participants to associate the new rules with the yet-to-be-announced Season 3 airdrop from Hyperliquid — however, there is currently no public evidence to prove a direct connection between the two, and this is more suitable as market speculation rather than a factual statement.

From "first catch" to "first establish rules"

The SEC's initiative to set new rules comes from a not-so-easy history. During the tenure of former Chairman Gary Gensler, the industry widely criticized him for adopting a "regulation by enforcement" approach — not providing clear rules in advance, but relying on post hoc lawsuits to define boundaries. The direct consequence of this approach was that many projects chose to restrict U.S. buyers and moved their issuance and financing activities outside the U.S.

The Regulation Crypto Assets is in some ways a remedial measure for the years lacking specific rules and primarily relying on enforcement and case-by-case interpretations. The SEC acknowledged in the proposal that the nature of investment contracts related to crypto assets might change as projects develop and issuers complete or cease their essential managerial efforts, which makes it difficult for traditional securities regulatory frameworks to directly adapt to this dynamic process.

Congress delays, SEC races ahead

The emergence of this draft has a more direct impetus — the CLARITY Act, seen as the "ultimate solution," has continuously faced obstacles in the Senate, and the market expectations on Polymarket regarding whether the bill can be legislated by 2026 have significantly weakened. White House crypto policy advisor Patrick Witt previously stated at the SALT conference that the government is leaving a window for Congress and the Senate to pass the bill but will not wait indefinitely — if the vote in September fails, regulatory agencies will advance rule-making on their own.

The SEC's rule proposal and the White House's subsequent pressure on the CLARITY Act appeared almost simultaneously, forming a resonance in the same policy direction: rather than waiting for a bill that could fail at any time, it is better to immediately utilize the existing rule-making authority of the administrative agency to keep issuance and financing activities within the U.S.

Tokens also have a “graduation season”

The draft is currently still in the opinion soliciting stage, with all three serving SEC commissioners voting in favor, but how airdrops, network rewards, and other non-cash distributions will be specifically valued, which projects can truly meet the safe harbor conditions, and how these rules will be implemented in actual cases still leave many details for public commentary and subsequent regulatory practice to fill in.

However, more noteworthy than the $5 million, $20 million, or $75 million is that the SEC is attempting for the first time to establish a clear procedural process for “when tokens will graduate from investment contracts”: the project team must first complete or cease key managerial efforts, self-certify, while the SEC retains the right to challenge afterward.

This means that the U.S. regulatory mindset concerning crypto assets may be shifting from "judging whether it is a security" to "managing how it transitions from a security to an independent asset."

In the past, the "graduation" of tokens was more a question that needed repeated explanation among courts, regulatory agencies, and the market; if these rules are ultimately implemented, "graduation" will, for the first time, have a relatively clear procedure and proof path.

But the change in rules will also, in turn, alter the behavior of project teams. Since the management commitments made during the issuance phase will become the basis for future judgments on "whether to graduate," project teams may need to recalculate: which commitments are worth publicly promising, which roadmaps must be documented, and which long-term goals they prefer to keep in internal planning.

What the SEC truly wants to redefine may not be how tokens are issued, but when tokens are considered truly "graduated."

And when "graduation" begins to have clear rules, the next competition will no longer just be "who can issue tokens," but who can complete the step of separating the token from the financing led by the project team more quickly.

*This content is for reference only and does not constitute any investment advice. The market has risks, and investments should be made cautiously.

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