Crypto firms, Wall Street push SEC to revise Regulation Crypto Assets as comments close

As the U.S. Securities and Exchange Commission’s public comment period on its proposed Regulation Crypto Assets draws to a close, digital asset firms, Wall Street institutions, and advocacy groups are making their cases for how the agency should shape the future of financial innovation.

Comments on the SEC's proposed Regulation Crypto Assets are due Tuesday, with more than 100 submissions filed so far. The new rule seeks to offer a pathway for investments involving digital assets that would exempt certain offerings from adhering to securities law. It includes a "startup exemption" that would exempt offerings of up to $5 million from registration rules. The proposal also includes a "fundraising exemption" for offerings up to $75 million for a one-year period.

The Hyperliquid Policy Center pressed the SEC in its letter to adopt Reg Crypto, but said changes were needed to address how airdrops are treated. The center asked the SEC to codify previous language that airdrops that give nothing in exchange for the asset do not involve an investment of money and are therefore not a security.

HPC also argued that the SEC's proposed safe harbor was too limited.

"The proposal’s new safe harbor requires a certification that many projects cannot make," the center said in a blog post on Monday. 

The Alternative Investment Management Association (AIMA) also asked for revisions, including information to explain investors' legal rights and risks that could extend to managers as well.

"Issuers should also distinguish utility or economic exposure from ownership, redemption, cash-flow and contractual rights," AIMA said in its letter. "We recommend tailored event reporting and clear treatment of information that is genuinely unavailable."

The SEC also proposed a long-awaited innovation exemption, which immediately went into effect in September and opens the door to onchain trading of tokenized stocks. It is a five-year exemption that would exempt certain trading venues, called tokenized securities venues, from being defined as an exchange and also exempts specific liquidity providers from being defined as a dealer under securities law when they trade stocks or provide liquidity through automated market makers, i.e., smart contracts.

On Monday, the Securities Industry and Financial Markets Association said the SEC needs to immediately address investor protection and said changes should be made in how issues opt in.

"The five-year term of the relief heightens the importance of resolving these questions at the outset, since early design choices will shape market practice well before any permanent framework is adopted," SIFMA said in its letter.

CFTC weighs compute and oil perpetual futures

The SEC's sister agency, the Commodity Futures Trading Commission, is also pushing forward its rules. One of its focuses has been on perpetual futures. The CFTC approved the first perpetual futures for Kalshi and Coinbase in August, opening the door for those assets to trade in the U.S. for the first time.

Since then, there has been a push for U.S. oil perpetual futures and more recently for compute perpetual contracts. In a post on Tuesday, the Hyperliquid Policy Center said the CFTC should bring those contracts into the U.S., given that investment in chips, artificial intelligence data centers, and other networking equipment contributed to the country's economy.

"When prices rise, the developers that rent compute carry the same risk with no widely available hedging tools," HPC said. "Pricing in the compute market remains fragmented and largely private."