The “Crypto Innovation Exemption” rule, which will take effect in the US next month, explains Coinbase’s recent acquisitions.

U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins has confirmed that the innovative exemption rules for cryptocurrency companies will officially take effect in January next year. This new regulation will redefine crypto asset categories and provide a more streamlined compliance pathway for token issuance.

(Background: U.S. SEC gives green light to crypto! Chairman Atkins: “Innovative Exemption” legislation will be prioritized by end of year.) (Supplementary: U.S. SEC Chairman: Planning “Innovative Exemption” for DeFi protocols, should not be penalized for others’ malicious use.)

On the morning of December 2, local time, Paul Atkins, Chairman of the U.S. Securities and Exchange Commission ((SEC)), confirmed in a speech at the New York Stock Exchange that the innovative exemption rules for cryptocurrency companies have been included in the 2026 roadmap and will officially take effect in January next year.

Cryptocurrency itself was not the core topic of this speech. Paul Atkins chose the NYSE as the venue to express his hope to lower disclosure requirements for innovative business companies, reduce mandatory disclosures, and scale requirements according to company size to make it easier for smaller companies to go public. In addition, Paul Atkins aims to “depoliticize” shareholder meetings, shifting the focus back to business operations.

Paul Atkins believes that current regulatory disclosure requirements are overly complex and should focus on “financial materiality.” Bloomberg interprets this as a hint of the Trump administration’s opposition to shareholder initiatives focused on environmental, social, and governance ((ESG)) measures and suggests a reduction in such disclosures.

The reason for mentioning these seemingly unrelated points to crypto is that specific terms of the innovative exemption rules for cryptocurrency companies have not yet been published. However, based on this year’s multiple Web3 industry IPOs and the new Fed Chairman’s attitude, some simple conclusions can be drawn:

First, the new SEC leadership does not intend to “relax regulation” but rather aims to eliminate outdated and redundant rules from the existing regulatory framework, thereby reducing compliance costs for companies. Multiple U.S. media reports have mentioned that Paul Atkins wants to lower mandatory disclosure requirements but will require increased emphasis on “financial materiality” information. The public listings of crypto companies like Circle and Bullish illustrate this trend.

As for “exemptions,” U.S. securities law has long had clear provisions—essentially, these are special circumstances that allow entities to bypass complex registration procedures. Many previous token issuances have made use of such exemptions, but only after meeting a series of requirements can they be listed on exchanges like Coinbase or Kraken, opening up to U.S. retail investors.

However, meeting these exemption requirements is itself a complicated task. From insiders, I’ve learned that Zksync wanted to issue a token much earlier, but due to the project’s scale, they underwent highly complex organizational restructuring to avoid regulatory troubles, ultimately succeeding in launching the token only after ensuring full compliance.

All these examples share a major premise: tokens are still defined as securities in some sense. But the new exemption policy may bring changes.

On November 12, local time, Paul Atkins stated at the Federal Reserve Bank of Philadelphia that Project Crypto will “draw clear boundaries” to distinguish different types of crypto assets. Paul Atkins categorized crypto assets into four types:

• Digital commodities or network tokens: Value is derived from a well-functioning and decentralized network, not from management team promises;
• Digital collectibles: NFTs and similar items purchased for use or appreciation, not for profit;
• Digital utilities: Utility tokens providing access or credentials;
• Tokenized securities: Blockchain representations of traditional financial instruments.

Paul Atkins believes the first three are not securities. However, directly allowing a new asset class that is not a security but resembles one would pose significant risks. Thus, the “innovative exemption” for crypto companies has emerged, potentially functioning like a regulatory sandbox, where the SEC may experiment with “light-touch regulation” for a time to explore long-term regulatory approaches.

Due to the government shutdown, the full exemption rules are expected to be released only when they take effect. Public information is very limited so far, but I have found some clues regarding the exemption terms.

In an SEC comment letter published on April 13, 2025, the following was mentioned regarding early versions of the exemption proposal:

• The proposed exemption conditions are for ICOs to facilitate early-stage fundraising for blockchain projects.
• Implementation of a mandatory basic registration system to ensure oversight and prevent abuse under the exemption.
• The SEC will establish a public verification tool to enhance transparency and investor protection.

Additionally, in the November 12 speech about Project Crypto, Paul Atkins stated: “In the coming months, as contemplated by current congressional legislation, I hope the Commission will consider a suite of exemptions to create a tailored issuance regime for crypto assets that are part of, or subject to, investment contracts. I have asked staff to prepare recommendations to facilitate capital formation and accommodate innovation while ensuring investor protection.”

It is clear that the exemption measures effective next January should be independent of, or at least an extension of, securities law exemption requirements. Combined with the new SEC chairman’s determination to correct overregulation, the new rules may not require excessive disclosure from Web3 projects seeking to issue assets or raise public capital, but there will certainly be a simple registration process and disclosure standards.

Speaking of disclosure standards, this brings to mind the information Coinbase disclosed during the public sale of Monad tokens, which included market maker identities and terms. In other words, while disclosure requirements may be simplified, some crucial information not previously required may become indispensable in the future. Furthermore, lower requirements for tokens and issuing projects will inevitably be offset by higher requirements for token issuance platforms, which is also addressed in securities laws.

This provides a logical explanation for Coinbase’s acquisition of Liquifi and Echo to position itself for asset issuance and public token sales as a compliant platform for future token offerings. I surmise that in the future, Web3 projects seeking to conduct compliant public fundraising in the U.S. will need to rely on an institution or platform that at least meets basic KYC and AML standards and is registered with the SEC.

Currently, the only public information centers on the “asset issuance” aspect. The SEC’s new rules are expected to relax standards to some extent, making it easier for new projects to issue assets and raise funds, but this will still be built on basic investor protection mechanisms. Compared to the past, which required setting up overseas nonprofit foundations, the new mechanism may be relatively simple.

After asset issuance, this regulatory sandbox will most likely further explore issues such as information disclosure by issuers. The good news is that in the future, we will have a clearer view of the operational status of projects; the bad news is that compliant asset issuance also provides a reasonable exit route for projects that fail to operate well and leave the public market. Compliance never means lowering the bar for selection, and greater tolerance for innovation will in turn demand higher professionalism from investors…