August 18, 2026 | NCFA Feature | Regulation And Policy, Digital Assets, Capital Markets And Market Infrastructure

New Offering Rules, Crypto Resales And Investment Contract Exit

On August 18, 2026, the U.S. Securities and Exchange Commission proposed Regulation Crypto Assets (download 402 page PDF Proposed Regulation Crypto Assets document), a tailored securities framework for certain investment contracts involving crypto assets. The 402-page proposal would create a startup exemption of up to US$5 million over four years, a larger fundraising exemption with US$20 million and US$75 million tiers, crypto-specific disclosures, new SEC forms, secondary-market provisions, state-law preemption and a process for determining when an investment contract has ended.

The scope is narrower than the name might suggest. Regulation Crypto Assets would apply to what the SEC calls a covered investment contract. A crypto asset must be subject to the investment contract, the crypto asset itself must not be a security and no other asset can be subject to that contract.

That builds on the SEC's March 2026 crypto interpretation. The March action addressed when transactions involving a non-security crypto asset can create an investment contract and when that relationship can end. Regulation Crypto Assets would add an operating framework around that lifecycle.

The proposal is significant because it goes beyond creating two new fundraising limits. The SEC is designing rules for how certain crypto investment contracts could be offered, disclosed, distributed and resold, and how the underlying crypto asset could eventually separate from the investment contract.

What Regulation Crypto Assets Does And Does Not Cover

The proposed Regulation Crypto Assets isn't a comprehensive U.S. crypto rulebook. It doesn't create the general regulatory regime for payment stablecoins, programmable payments, crypto custody, crypto lending, mining or conventional securities that happen to be tokenized. Those activities may fall under other federal or state laws, other regulators or separate SEC work.

Payment stablecoins are a good example. Regulation Crypto Assets says permitted payment stablecoins could be accepted as consideration in a covered offering and would count toward its offering limit. It does not establish the rules for issuing payment stablecoins.

That work is proceeding separately under the federal GENIUS Act. On August 17, one day before the SEC proposal, the U.S. Treasury issued a proposed payment stablecoin rule covering implementation of the separate federal framework for their issuance, offering and sale.

Other crypto activities can intersect with Regulation Crypto Assets without becoming generally regulated by it. The proposed Startup Exemption contemplates certain distributions connected with development and use of a crypto network, including circumstances involving airdrops, staking, governance, gas fees and testing. The legal question remains whether the particular transaction involves a covered investment contract.

The proposal also doesn't create a new legal category for tokenized stocks or bonds. Tokenized conventional securities remain securities. Regulation Crypto Assets instead addresses a narrower case where the crypto asset itself isn't a security but is subject to an investment contract.

It's important for founders, investors, lawyers and trading platforms to know that a crypto asset, an investment contract involving that asset and a tokenized security, can look technologically similar while carrying very different securities-law consequences.

The US$5M Startup Route Removes Several Reg CF Frictions

The proposed Startup Exemption could be used for no more than four years after an issuer's initial Form NOR filing. The issuer and its affiliates could conduct covered transactions up to an aggregate US$5 million during that period and couldn't simply restart the four-year clock for the same or a substantially similar crypto asset.

The issuer definition is unusually flexible. The proposal would allow an entity, an individual or a group of individuals or entities to qualify, subject to the other conditions. That accommodates crypto projects that may begin with a development team before they resemble a conventional corporate securities issuer.

The fundraising mechanics are also important. The proposed startup route would permit general solicitation, impose no individual investment limit on retail purchasers and require neither financial statements nor use of a registered intermediary. Covered investment contracts sold through the exemption would not be restricted securities under federal law and would not carry a separate rule-based holding period.

Disclosure doesn't disappear. Before conducting covered transactions, the issuer would file Form NOR on EDGAR and make the disclosures required by Rule 103 publicly available free of charge.

Those disclosures are designed around the investment contract and crypto network. They include offering terms, management and conflicts, the crypto asset, development plans, network or application security, source code where applicable, token economics and allocations, governance, the related crypto ecosystem and material risks. The information must remain publicly available, with material changes addressed under the proposal's update requirements.

Bad-actor disqualifications would apply as well, and issuers would remain subject to federal antifraud and antimanipulation rules. This is a different compliance model, not an absence of securities regulation.

The most revealing comparison is Regulation Crowdfunding. Reg CF also permits up to US$5 million, but over a 12-month period. It requires a registered broker-dealer or funding portal, financial disclosure and investment limits for non-accredited investors, while securities generally face a one-year resale restriction.

The SEC makes that comparison itself. Its economic analysis estimates average Reg CF intermediary fees at approximately 6.6%, with a 6% median, and identifies the absence of mandatory financial statements and an intermediary as potential cost savings under the crypto Startup Exemption.

There is little evidence that current Reg CF rules have produced a large crypto financing market. SEC data identify 42 crypto-related Reg CF offerings by 41 issuers between 2016 and 2024. Reported proceeds totalled approximately US$13.6 million, with an average of US$545,300 among offerings for which proceeds were reported. The SEC cautions that the proceeds total is incomplete and likely represents a lower bound.

The proposal is therefore testing more than a higher ceiling. It asks whether removing particular intermediary, financial reporting, investor and resale frictions would make a public capital route more workable for qualifying crypto projects.

Tier 1 Fundraising Exemption US$20M With Ongoing Reporting

Larger projects could instead use the proposed Fundraising Exemption. Tier 1 would permit up to US$20 million in 12 months. The issuer would have to file Form 1-CRYPTO and couldn't sell covered investment contracts until the SEC qualified the offering statement.

The offering circular would combine the crypto-specific Rule 103 disclosures with financial information about the issuer. Tier 1 financial statements generally wouldn't require an audit, but the issuer would still enter an ongoing reporting regime using annual Form 1-KC, semiannual Form 1-SC and Form 1-UC for specified current events.

Retail investors would also face a restriction that doesn't apply under the Startup Exemption. A non-accredited investor generally couldn't purchase more than 10% of the greater of annual income or net worth. For a non-natural person, the test would use revenue or net assets.

Tier 2 Fundraising Exemption US$75M With Audited Financials

Tier 2 would permit up to US$75 million in 12 months. Like Tier 1, it would require Form 1-CRYPTO, SEC qualification before sales, ongoing reporting and the 10% non-accredited investor limit. The key additional financial requirement is that Tier 2 statements would have to be audited by an independent accountant under the proposed standards.

The larger Fundraising Exemption also comes with a strong U.S. nexus. The issuer would have to be an entity organized under U.S. law, a majority of its executive officers or directors would need to be U.S. citizens or residents, more than half of its assets would need to be in the United States and its business would have to be administered principally there.

Canada appears explicitly in the SEC's request for comment. Question 86 asks whether Canadian issuers, or other foreign issuers, should be permitted to rely on the Fundraising Exemption.

That is more than a passing jurisdictional detail. Regulation A already allows qualifying Canadian issuers, while the proposed Regulation Crypto Assets fundraising route currently does not. Whether the SEC changes that provision could affect how useful the US$20 million and US$75 million routes become for Canadian crypto companies.

Resale And State Rules Could Expand Crypto Distribution

The proposal's treatment of secondary transfers may prove almost as important as its fundraising limits. The SEC says existing exemptions can impede the network effects of crypto assets when they restrict who can participate or how quickly securities can be resold.

Both proposed exemptions would therefore allow issuers to sell covered investment contracts that are not restricted securities under federal law. Investors wouldn't face the federal holding periods associated with restricted securities, although contractual restrictions and other applicable laws could still affect a transfer.

That differs from common Regulation D offerings and from Reg CF's first-year resale limits. The SEC's rationale is specific to crypto networks. Wider ownership and use can contribute to how a network operates and how the crypto asset derives value, so distribution restrictions can affect more than investor liquidity.

See: Canada's Stablecoin Regulatory Framework

Rule 500 would address another obstacle by proposing federal preemption of certain state registration and qualification requirements. It would treat purchasers in qualifying Regulation Crypto Assets transactions as qualified purchasers for that purpose and extend the treatment to specified secondary-market transactions.

The preemption isn't unlimited. Secondary-market treatment would depend on the issuer remaining current with the disclosure, filing or reporting requirements attached to the applicable exemption. States would also retain antifraud authority, powers over unlawful broker or dealer conduct, notice filing requirements and applicable fees.

For trading platforms and intermediaries, the proposal introduces an additional status question. They may need to distinguish between the underlying non-security crypto asset, an outstanding covered investment contract involving it and an asset for which that investment-contract relationship has ended.

The Safe Harbor Creates An Investment Contract Exit

Rule 400 addresses one of the most distinctive features of the proposal. The SEC's existing securities rules generally deal with financial instruments whose fundamental legal character doesn't change over time. A crypto asset can present a different problem because an investment contract surrounding it may end while the crypto asset continues to exist and circulate.

The proposed safe harbor would apply when the issuer has completed or permanently ceased all essential managerial efforts that it represented or promised under the covered investment contract. The issuer also couldn't be making, or intending to make, new promises to perform those essential managerial efforts.

An issuer seeking to use the safe harbor would file Form TR. The filing would include a certification and an analysis supporting the conclusion that the required managerial efforts have ended.

Meeting those conditions would mean the crypto asset is deemed no longer subject to that investment contract for the relevant definitions of a security under the Securities Act and Exchange Act. That doesn't mean Form TR can convert a security into a non-security simply because an issuer files it. The substantive conditions still have to be satisfied, and the SEC can challenge an issuer's analysis.

Nor does the proposal replace Howey or the March interpretation. The safe harbor creates one defined route for dealing with the end of an investment contract. The SEC acknowledges that a covered investment contract could also cease to exist outside the safe harbor under the applicable securities-law analysis.

That lifecycle helps explain why the proposal is more consequential than a new exemption schedule.

The SEC is contemplating a regulatory sequence in which a project can finance development through an investment contract, distribute the associated crypto asset widely and potentially reach a point where the investment contract itself no longer exists.

Canada Could Face A Wider Crypto And Funding Gap

Canada has dealt with token offerings for years. Canadian securities regulators issued guidance on cryptocurrency offerings in 2017 and followed with more detailed token offering guidance in 2018. The CSA has made clear that coins or tokens can involve investment contracts and distributions of securities depending on their economic substance and how they are offered.

There have also been Canadian security-token initiatives and exempt-market token offerings. The difference isn't that Canada has avoided token issuance. Canada has generally applied its existing securities laws, prospectus exemptions and registration framework rather than creating a dedicated crypto lifecycle regime comparable to Regulation Crypto Assets. That difference also fits Canada's wider capital formation gap.

Capital formation makes that difference more important. Canada's NI 45-110 startup crowdfunding exemption currently permits an eligible issuer to raise up to C$1.5 million over 12 months. An investor generally can invest up to C$2,500 in an offering, or C$10,000 when a registered dealer determines that the investment is suitable, and the offering must take place through a funding portal.

The Canadian market is also much smaller. FrontFundr reports that it processed C$4.79 million from 4,320 investors under NI 45-110 in 2025 and accounted for 93% of activity under the exemption. Because that 93% figure comes from FrontFundr rather than an official national regulatory dataset, it should be treated as a platform estimate rather than an official Canadian market total.

There is stronger evidence that the C$1.5 million ceiling is becoming binding for some issuers. Edison Motors raised C$1.491 million under NI 45-110 in 2025, roughly 99% of the limit. Blossom Social raised C$1.450 million, approximately 97%.

See: Reg CF At 10 Shows Equity Crowdfunding Works

The more direct U.S. comparison is Regulation Crowdfunding. Reg CF already allows eligible companies to raise up to US$5 million in 12 months, but requires an SEC-registered intermediary, limits investments by non-accredited investors and generally restricts resale for one year. The proposed US$5 million crypto Startup Exemption would use the same headline ceiling with a different compliance model.

The larger crypto Fundraising Exemption is more directly comparable with Regulation A. Existing Reg A already uses US$20 million Tier 1 and US$75 million Tier 2 limits, with additional audit, investor-protection and ongoing-reporting requirements at Tier 2.

Canada is a different comparison. NI 45-110 isn't a crypto-specific equivalent to Regulation Crypto Assets, but it is Canada's nationally harmonized startup crowdfunding route. It remains capped at C$1.5 million over 12 months, with a funding-portal requirement and investor limits of C$2,500 per offering or C$10,000 with suitability advice from a registered dealer.

NCFA has been advocating for a C$5 million or higher issuer cap for years, arguing that the C$1.5 million ceiling can limit the usefulness of the exemption for growing companies. That concern is now easier to test against actual market activity, with some Canadian crowdfunding campaigns reaching close to the current ceiling.

The relevant policy question is therefore wider than whether Canada has an identical crypto exemption. The U.S. already offers Reg CF and Regulation A for different stages of capital raising and is now proposing a separate crypto-specific framework built around fundraising, token distribution, resale and the eventual end of an investment contract.

That matters because Canada's capital formation system already has funding gaps, while some Canadian crowdfunding campaigns are reaching the NI 45-110 ceiling. Regulation Crypto Assets could add another financing and regulatory option to the U.S. market without a directly comparable Canadian crypto-specific route.

The proposed US$75 million Tier 2 also raises a separate competitiveness issue. The SEC is asking whether Canadian issuers should eventually be eligible for the Fundraising Exemption. If they are included, qualifying Canadian crypto companies could gain access to a much larger U.S. pathway. If they remain excluded, access to U.S. capital could become another factor projects consider when deciding where to organize and raise funds.

None of this means Canadian regulators should copy the SEC. It does strengthen the case for examining Canada's startup financing limits, token-offering rules and capital-market pathways together rather than as separate policy files.

For Canada, the challenge is whether existing rules can protect investors while giving legitimate companies enough financing capacity and regulatory flexibility to build here. If the U.S. adds specialized crypto fundraising routes on top of Reg CF and Regulation A, that competitive comparison becomes more difficult to ignore.

Talking Point

If the U.S. adds a dedicated crypto capital-formation and investment-contract lifecycle regime on top of Reg CF and Regulation A, while Canada still relies on existing exemptions and a C$1.5 million startup crowdfunding cap, how long can Canada treat crypto regulation and capital-formation reform as separate policy questions?

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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