SEC Sets the Stage: The 'American ID' for Crypto Projects is Coming

The compliance arbitrage logic of "offshore hedging" that has prevailed for the past eight years is being reversed.

Written by: Conflux

On July 7, the SEC updated its regulatory agenda for 2026.

Most of the external attention has focused on the "crypto safe harbor"—which is indeed a key point, but not the only one. SEC Chairman Paul Atkins has proposed at least three crypto-related rules in this agenda: Crypto Assets (exemptions for issuance and sales, safe harbor), amendments to broker-dealer financial responsibility and record-keeping rules for crypto assets, and Crypto Market Structure Amendments (trading structure amendments). Issuance, custody, and trading are all being laid out together.

This is a comprehensive infrastructure shift towards compliance, not just a single news item.

From Witch Hunt to Licensing Model

First, let’s clarify how significant this shift is.

A few years ago, during the Gensler era, the SEC's approach was "enforcement equals regulation"—no clear rules were provided, and lawsuits were initiated first.

Coinbase, Ripple, Kraken, and Binance were all subjected to this treatment during those years. This was a strategy to scare the entire industry away with litigation costs, forcing many projects to relocate to Singapore, the Cayman Islands, or Switzerland to avoid U.S. regulatory reach.

Now, Atkins's approach is completely the opposite. He has explicitly linked this agenda to Trump’s goal of making the U.S. the global crypto capital, with the idea of giving project teams a legitimate window period instead of waiting to be sued. The lawsuits against major exchanges have also been gradually withdrawn.

This represents a complete turnaround in regulatory posture: from "hunter" to "licensing authority." For any team that has previously relocated due to compliance risks, the weight of this signal is heavier than any bullish market news.

What’s Inside the Safe Harbor

Specifically regarding the "Crypto Assets" rule, the terms are not complex, but each one precisely addresses the pain points of project teams.

• Early-stage projects: Teams with valuations below $5 million and less than four years of establishment can receive a temporary exemption and do not need to immediately complete the full securities registration process.
• Financing limits: Through specific crypto investment contracts, entrepreneurs can legally raise up to $75 million.
• Exit mechanism: When the issuer has completed the previously promised development and governance work and no longer has substantial management rights over the project, the token itself will no longer be classified as a security. The more decentralized the project, the easier it is to "graduate" from securities regulation.

This logic essentially incorporates the "token safe harbor" concept proposed by Hester Peirce in 2020 into a formal rule draft for the first time. Previously, this was just a significant but legally ineffective proposal within the SEC; now it is set to become an enforceable rule.

Two Countdown Clocks

The sudden acceleration of this matter in July is due to Atkins racing against two clocks.

The first clock is the Clarity Act in Congress. This crypto market structure bill has passed the House of Representatives and was released by the Senate Banking Committee in May with a vote of 15 to 9, but to become law this year, it must pass the Senate before August—if it drags into the midterm election season in November, the legislative window for this year will essentially close.

The second clock is human. Peirce's second term expired last June, and she is currently only serving as an acting member; she plans to leave for teaching in November. She is the original proponent of the safe harbor concept and a key source of thought for this new regulation. Once she leaves, it is uncertain whether her successor will continue this framework.

Atkins has been very straightforward: only rules formally written into the Federal Register are things that the future SEC team cannot overturn with an internal memo. The compliance space built over the past few years relied on employee statements, exemption letters, and interpretive guidance, which are essentially "subject to personnel changes." This time, he aims to solidify the window period.

Not Just Crypto

Atkins used a striking phrase in his statement—"Make IPOs Great Again." He has directly integrated the crypto safe harbor into the SEC's overall narrative of "reviving the American public markets": over the past few years, the number of publicly listed companies in the U.S. has continued to shrink, with more and more companies choosing to remain in private markets for the long term or simply listing on other exchanges. The core anxiety of this round of SEC agenda is that the attractiveness of U.S. capital markets is declining, and crypto is just a piece of the puzzle being unlocked, not the main character.

More importantly, there is another line: the SEC is preparing to promote greater participation of retail investors in private markets while retaining necessary protective clauses. If this truly materializes, it means that the doors to the primary market, which have long been open only to institutions and high-net-worth individuals, will crack open for ordinary investors.

Looking at these two lines together with the crypto safe harbor, the logic connects: the SEC is simultaneously opening up the "private market to retail investors" and "allowing crypto projects to raise funds legally in the U.S." In the past, ordinary investors wanting to access primary market crypto projects faced two walls—one was the entry threshold of the private market itself, and the other was the uncertainty of securities classification for crypto assets. This agenda effectively loosens both walls.

The "American Repatriation" Narrative

Setting aside the details of the terms, what this agenda should truly be remembered for is that it sends a directional signal to the entire industry: the compliance arbitrage logic of "offshore hedging" that has prevailed for the past eight years is being reversed.

In recent years, the conventional operation for primary market financing has been—setting up entities in the Cayman Islands, conducting token sales in Singapore or Dubai, while U.S. investors cautiously navigate to avoid any association with securities classification. This operational model has supported an entire generation of offshore law firms and compliance intermediaries, essentially using geographical distance to hedge regulatory risks.

Once there is a clear safe harbor in the U.S., combined with the simultaneous implementation of custody and trading structure rules, this offshore dividend will be rapidly diluted. Teams will have no reason to continue paying extra compliance costs and trust discounts for "offshore identities," especially when the U.S. offers a definitive window rather than relying on personal connections and luck.

Pushing this logic further, it actually involves the funds that have been kept out due to the uncertainty of securities classification over the past few years—traditional VCs and family offices have been hesitant to touch any tokens that could potentially be classified as securities. Once the safe harbor is established, the biggest barrier for these funds to enter will be dismantled; if retail private market access is also loosened, the objects connected by this channel will expand from a few institutions to a broader group. The funding structure of the primary market may be reshuffled due to this document.

Of course, this is still just a proposal and has not yet entered the formal public comment phase; it still has to go through a round of public opinion period before it can be finalized. The direction is clear, but how it will be articulated remains uncertain.

What truly determines the weight of this matter is not what Atkins says this month, but what happens in the coming weeks—whether the Clarity Act can successfully pass the Senate and whether the safe harbor rules can be formally finalized before Peirce leaves. Which of these two countdowns finishes first will largely determine whether this round of "American repatriation" narrative is genuinely realized or just another empty window period.