Well, let's get to the big story breakdown. With less than one week to go until the highly anticipated Senate cloture vote on the Clarity Act, Senate Republicans say they don't believe the vote will pass, and this could be the latest setback with less than two months to go until the midterms. While the Senate has been on recess, the regulatory agencies have taken the ball.
The SEC has just proposed regulation crypto assets, a brand new framework designed to give digital asset issuers a compliant path to raise capital here in the U.S. and this proposal directly borrows from existing regulated investment crowdfunding laws, setting the stage to completely rewire how token projects launch, as well as raise funds and operate under federal law.
Well, joining us this morning to weigh in is Brian Christie, vice chair and past president of the Crowdfunding Professional Association. Brian, good morning. Thank you so much for joining us. So there is a lot of ground to cover. And I do want to start out with the SEC's regulation crypto assets. So when most of our audience here is crowdfunding, they might think about some of those platforms out there, like Kickstarter, but what exactly is the legal framework that governs the regulated crowdfunding industry today?
Yeah. Good question. So, um, and I think it's good to do a crowdfunding 101 for those of your viewers who are not particularly familiar with with the term uh, regulation crowdfunding, regulated investment crowdfunding really covers three exemptions that have to that govern the crowdfunding industry.
So one is regulation crowdfunding, which is title three that came from the Jobs Act, which was passed in 22. The second is regulation A, which was amended during the Jobs act as well. And then the third one is as rule 506 C, which is under Reg D, allows for general solicitation to an accredited investors.
Each one of these has different attributes. And so unlike Kickstarter which is rewards, or GoFundMe which is donations, it's a very much a highly regulated area. Uh, lots of rules under which these issuers and operate. And there's a whole ecosystem of platforms, lawyers, marketers, folks who really follow a set of rules that govern this.
So that's what distinguishes it from from just what most people hear when they want, when they hear the word crowdfunding.
Yeah. And Brian, while I have you here, I think when it comes to the digital asset space taxes as well as innovation or something that are top of mind. But the new crypto proposal includes a tier one capital limit of $20 million, which happens to be the exact cap that the industry has been pushing for. So beyond that dollar amount.
What else did the SEC copy from your world and what did they specifically choose to leave out?
Yeah. Good question. So actually the SEC is looking at they're proposing three different sort of tracks for for regulation Crypto assets. The first is a really a startup exemption, which would allow. To raise up to $5 million over a four year period. And that mirrors what happens in Reg CF today, which is a 5 million limit per year.
Now there are lots of differences that they're proposing. So for example, in reg CF uh, issuers have to go through an intermediary, whether that's a broker broker dealer or a funding portal. And that's not proposed here for the startup exemption under uh reg CA. Uh second area is tier one and tier two, uh reg of reg CA, which allows companies to raise up to $20 million or $75 million.
Now this comes with additional disclosures requirements that comes with uh requirement to do some, you know, provide some financials in the case of tier two, uh, audited financials. And these are things that we're very familiar with in the world of regulated based on crowdfunding, because under reggae there are also two tiers $20,000,075 $75 million.
We as an association, as an industry, would like to see the reg CF limit actually move toward 20 million as well. Uh, so because there are already a lot of disclosures, there's a lot of things provided in, in the, um, uh, requirements for people, for companies who are going to raise, uh, under, under reg CF so there's a lot of things that are, that are in parallel, but there are a lot of things that actually, uh, that the SEC doesn't require.
Uh, so for example, they don't require an intermediary for any sort of raise. Uh, there are other things that, that they don't require. Uh, there's not as heavy as a disclosure package. Um, it's required under CF. So I think what the, the commission's tried to do, they tried to borrow the structure of what we see under regular investment crowdfunding, and they've tried to look at some of the areas where there might be current friction and make it a little easier for people who are in the world of crypto to.
To raise. So that way they want to they want to actually make it a little more friendly for for the industry work around some of the things that were maybe set in the rules for regulation crowdfunding, which have, you know, not not the most efficient things that I think the industry would like to see changed.
They've gone ahead and made some of those changes in the area for for the Brexit proposals.
Yes. And Brian, while I have you here, there's a lot of anticipation as we count down to key events in September here. But can you tell us about your expectations for updated guidance on the tokenization exemption? What do you think that will look like?
Well, when you say that the tokenization exemption in terms of reg CA, that's something where uh, clearly if if the uh, the Clarity Act is passed, a lot of these rules are set in stone. And so that's where, where, where, um, uh, uh, the, you know, from those will flow the exemption and the rules that the SEC sets.
Now, if if the if the Clarity Act is not passed, then it really relies on the exempt of capability of the SEC itself in order to pass some of the rules they want under under regulation CA. So this will very much have an impact on what they call non crypto securities. So those securities that are being you know that are being tokenized today, it really doesn't affect because those will continue to fall under the existing regime of of of regulation.
Well Brian we will have to leave it there for today. But thank you so much for joining us this morning from the nation's capital. Appreciate your time as well as all of your insights.
Okay.
Thank you Remy.
