The US Securities and Exchange Commission (SEC) seems to be actively working to provide an improved environment for cryptocurrency startups to develop and thrive in with a recent amendment to current rules on crowdfunding. Originally, crypto startups were limited to a funding cap of $1.07 million from a selected pool of investors, but with the newly announced stipulations, this cap has been moved to $5 million instead.
Under the Regulation Crowdfunding section, crypto startups can raise up to $5 million USD with the sale of securities without having to register with the SEC. Investment limits have also been removed for accredited investors, while the limit for non-accredited investors can be based on either their net worth or annual income, whichever is greater in amount. This significantly increases the flexibility of investments for both investor tiers.
Moreover, crypto startups will be allowed to “generically” promote their projects without registration before it is formally classified for an exemption, if applicable. A project’s promotion efforts during this period of time will not be seen as solicitation or advertising and hence, will not be penalized by the SEC.
The impact of this amendment might not be significant as yet, but it is still beneficial for startups to be able to widen their investor base and be given greater leeway to grow and comply with regulations. For one, startups can rely on other forms of fundraising other than putting all their eggs into a single basket, which is usually tied to VC firms.
The SEC has long been criticized for lack of clear regulations and standard of procedures in their crackdowns of the crypto industry. With every added amendment, the US crypto industry is heading one step further in obtaining regulatory clarity and creating a safe space for both investors and businesses to succeed in this sector.
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