SEC issues new guidance for registering and reporting crypto assets

The Corporation Finance Division of the Securities and Exchange Commission released its new staff's views on April 10th.

The statement covers a variety of topics, including how companies present information about business operations, token design, governance, technical specifications, and financial reporting.

Although no new regulations will be created, this document reflects current expectations for how SEC staff will prepare applications. It also demonstrates a more open approach to crypto regulations under new leadership.

Clear direction for subscribers

This guidance focuses on filings under the Securities Act of 1933 and the Securities Exchange Act of 1934, and is intended to assist entities involved in token launches or platforms built on blockchain infrastructure.

These submissions may include registration forms such as Form S-1 of Public Supply, Form 10 of Reporting Company, Form 20-F of Foreign Issuers, Form 1 of Regulation A Waiver.

Companies are expected to provide a clear overview of the technical framework behind revenue strategies, project milestones and related digital assets. If Crypto Asset has functionality within your business, that information should be described in explicit terms, such as enabling transaction, governance, or access to services.

The SEC also expects consistency between these descriptions and what is shared in promotional material such as white papers and developer documentation.

If development is ongoing, this statement advises businesses to outline major milestones, expected timelines, funding sources, and tokens or networks that play the role they launched.

This includes consensus mechanisms, transaction fees, and explanations of whether the network uses open source or proprietary software.

Disclosure requirements

The SEC also reduced expectations for disclosures about investment risks, including token volatility, liquidity restrictions, legal classifications and security vulnerabilities.

For example, if a company's business model depends on a third-party blockchain or another external network, then it's necessary to explain their dependencies. The same applies to deals with market makers and custodians.

Issuers must disclose whether the token has voting rights, profit sharing mechanisms, or redemption procedures, and how those rights are communicated or altered. This document also asks for details on how tokens are created, whether the supply is fixed, or whether a lockup period applies.

If a smart contract manages the behavior of the token, the code must be submitted as an exhibition, and the updates must be reflected in future revisions. Additionally, companies should explain how to track ownership of tokens, the tools needed to transfer assets, and the fees associated with their transfer.

Companies must also disclose information about leadership and key personnel, including individuals or entities that do not hold a formal title but may play a central role in decision-making. For products traded on trusts or exchanges, disclosures must include information about sponsors and their officers.

Financial disclosures must follow established accounting standards and the SEC encourages businesses facing new reporting situations to consult with the firms of key accountants.

Although not a binding, staff guidance provides a reference point for cryptographic entities that navigate the registration. It reflects the growing attention of the SEC on the crypto market as more companies are operating within the public market and seeking to raise capital through blockchain-based products.