SEC Releases New Disclosure Guidelines for Crypto Issuers

The SEC has issued new guidance for crypto-asset securities disclosures, stressing clarity in language and identification of officers. The guidelines also raise concerns about accountability for pseudonymous founders and require issuers to maintain ownership records. This step is part of the SEC’s broader strategy to enhance cryptocurrency regulation under Acting Chair Uyeda.

The US Securities and Exchange Commission (SEC) has released new guidance on disclosure requirements specifically aimed at issuers of crypto-asset securities. This step is seen as interim, The SEC Crypto Task Force continues working on broader guidelines. Issuers are now expected to comply with these requirements during the issuance of debt, equity, or crypto-asset tokens regarded as investment contracts.

SEC Commissioner Hester Peirce has previously pointed out that many cryptocurrency tokens might initially qualify as securities but could later morph into commodities. However, the specifics of this transition are still somewhat unclear. This latest guidance essentially serves as a basic roadmap for what should be included in an S-1 filing, used during a securities issuance.

One of the key takeaways from the guidance is the need for simplicity in language. Some crypto firms have previously opted for overly technical jargon, which the SEC now explicitly advises against. A clear, concise business description is crucial, yet many firms need to heed this advice as they strive for compliance.

Another consideration is the issue of pseudonymous founders in crypto projects. While the guidance doesn’t address this explicitly, it insists that all officers must be identified, including those in informal policy-making roles. This raises concerns about accountability, particularly if a founder has a questionable past.

As crypto projects evolve, issuers might not always know who their token holders are beyond initial issuance. However, they are expected to keep track of wallet addresses as a record of ownership, which raises privacy concerns and compliance hurdles, especially in secondary market trading.

Additionally, the guidance seeks clarity on asset rights in the event of project failures. Many existing crypto projects lack proper disclosures on equity ownership, which won’t sit well within the coming regulations. This new framework pushes for clarity in areas that cryptocurrency firms have often glossed over.

This move is part of the SEC’s ongoing strategy to adapt cryptocurrency regulations under Acting Chair Uyeda’s leadership. The SEC has already rescinded previous actions hindering digital asset custody by banks, issued guidance on meme coins, stablecoins, and crypto mining, and launched a dedicated crypto task force to facilitate further discussions in the industry.