June 6, 2023

SEC will simplify fundraising through ICOs for cryptocurrency companies

The US Securities and Exchange Commission (SEC) proposed to amend the rule that allows not to register token offers. This will make it easier to raise funds through ICOs for cryptocurrency firms.

Proposed changes aim to improveexisting "complex and confusing" structure, and should simplify the implementation of token offers, as well as protect investors. In the United States, securities offerings, including ICOs, must either be registered with the SEC or eligible for registration exemption. Most entrepreneurs, for example, Telegram, raise capital using this right.

Many token offers fall under504 "Regulation D". In accordance with the proposed changes, the maximum amount that can be raised from non-accredited investors under this rule will increase from $ 5 million to $ 10 million in 12 months.

The Commission stated that the changes reflecta comprehensive retrospective review of the system that has been created over many decades, and seek to bridge the gaps and complexities of the system of exempted proposals. This system may impede access to capital for issuers and access to investment opportunities for investors.

SEC notes that the current structure has 10exceptions or “safe havens”. Each of them has different requirements, which "can be misleading and make navigation difficult for issuers." The new rules offer four “safe havens” for proposals eligible for exemption from registration. The proposed changes are also aimed at:

  • Implementation of a single widely applicable rule that will allow issuers to switch from one exemption to another and, ultimately, to a registered offer;
  • Increasing the supply limit and revising certain individual investment limits;
  • Establishment of clear and consistent rules governing the exchange of information between investors and issuers;
  • Harmonization of certain disclosure and compliance requirements to reduce differences between exemptions.

Amendment public comments will be accepted within 60 days. SEC Chairman Jay Clayton commented on proposed rule changes:

“The complexity of the existing structure is confusingmany involved in this process. This is especially true for small companies, whose limited resources are spent on learning our too complex rules, and are distracted from direct investment in company growth. These changes are intended to create a more rational structure that will allow entrepreneurs to access capital while maintaining and strengthening investor protection. ”

Commission also plans to expand definition"Accredited investor", which currently means an individual with a fortune of $ 1 million or an enterprise that controls assets worth more than $ 5 million. New changes include the definition of those who have professional knowledge and experience in the field of investment.

SEC has repeatedly attracted companies toresponsibility for conducting an unregistered ICO. Last month, the Commission fined Enigma startup $ 500,000 for conducting an unregistered ICO, and in the fall, Block.One agreed to pay SEC $ 24 million on a similar charge. The most high-profile case was the presentation of Telegram claims for conducting an unregistered ICO. Now the case is being considered in court.