SEC Updates Fundraising Provision, Good for Crypto Companies?

The United States Securities and Exchange Commission (SEC) on Nov. 2, voted to change the rules of fundraising provision by increasing the limits. Taken in the context of cryptocurrencies and Security Token Offerings (STOs), the changes may benefit cryptocurrency companies looking to raise capital. Specifically, the SEC said that it wanted to, “ harmonize, simplify, and improve the multilayer and overly complex exempt offering framework.” The described goal is to increase capital formation and expand investment opportunities. Under the new rules, companies can now raise $5 million in total under Regulation Crowdfunding provisions, $75 million under Regulation A, and $10 million under Rule 504 of Regulation D. Other changes include modifications to accredited investor limits and filing. The changes suggest the crowdfunding process may be quicker and more effective due to less paperwork and greater limits.

Regulatory Scrutiny Remains High

The SEC has conducted several investigations in the past year, with the last few months, in particular, seeing heightened activity. Most notably, the SEC concluded its case against KIK who was charged with running an unregistered securities offering. KIK settled the case with a $5 million penalty. SEC Chairman Jay Clayton, who previously talked about crypto, has shown some optimism. Clayton believes that tokenized stocks will have a future, a development recently attempted by fractional share trading platforms. The US Commodity Futures Trading Commission and Department of Justice are also carrying out their own cases. BitMEX is likely the largest entity under the scanner right now, as the company runs deeper into trouble.

SEC Neither Friend Nor Foe?

Despite this, commissioner Hester Peirce, affectionately known in the crypto community as ‘Crypto Mom’, has made clear that there is much to be gained from using the technology. The SEC has so far only tackled projects that it believes are operating as unregistered securities. It has yet to indicate how it will deal with the market at large. Peirce, meanwhile, suggested a Token Safe Harbor Proposal that would provide a grace period for emerging projects. She described it as “A proposal to fill the gap between regulation and decentralization.”