On August 18th, the SEC proposed Regulation Crypto Assets, a new framework for certain investment contracts involving crypto assets.
I’ve recently developed a passion for policy, so let me take you through the salient points.
The regulations include two exemptions from registration requirements: a one-time exemption for offerings of up to $5 million over four-years, and a second exemption for offerings of up to $75 million during each 12-month period.
It also proposes something potentially more consequential: a safe harbor for crypto assets that were once associated with an investment contract.
The SEC is recognizing that a crypto asset and the investment contract surrounding its original sale are not necessarily the same thing, not forever. So if an issuer has completed the managerial efforts it promised investors—and satisfies the safe harbor’s other conditions—the investment contract can be deemed to have ended. The underlying non-security crypto asset would then no longer be treated as subject to that investment contract under the Securities Act and Exchange Act.
In essence, the crypto asset would then face fewer regulatory obligations. To me, this feels like a long-awaited turning point. Especially because of the regulatory philosophy underlying the change.
To explain the change, and what it means, we are going to have to do some historical analysis.
Cryptocurrency has historically been difficult to regulate.
The SEC’s mission is to protect investors, maintain fair markets, and facilitate capital formation. Because traditional financial regulation was built around institutions, its existing rules accomplish investor protection by placing the monitoring and registration burdens on human and institutional intermediaries.
In the years BCE (before crypto era), human intermediaries–banks, broker-dealers, investment advisers, exchanges, and issuers etc—executed transactions, maintained records, made disclosures, imposed controls.
But in 2008 Satoshi Nakamoto invented bitcoin and we entered the CE (crypto era).
One of its central innovations is that software can perform functions that previously required financial intermediaries. Assets can move through smart contracts. Markets can operate on protocols. Strategies can execute automatically.
This is enormously valuable.
But there’s a consequence: When you remove an intermediary from execution, you can also remove an important source of assurance.
This is why, in the past, crypto-regulation debates got stuck. SEC wants to add the assurance back in; but the industry wants to preserve decentralization.
So do we impose investor-protection policies on crypto, or not?
It’s the wrong question.
The right question is: in the decentralized world with programmable money, assets, and trade, how do you guarantee investor protection?
Our answer: proof.
Regulation by principles.
This is where we come in. Inherence has technology to give the SEC the ability to ensure that their conditions are fulfilled, even in crypto contexts where the intermediary is missing. We fill the assurance gap.
And the good news is that this SEC is open to regulating by principle, looking at the substance of investor protection.
In Episode 203 of Law of Code podcast, Taylor Lindman, chief counsel of the Crypto Task Force, touches on this when he discusses principles-based regulation versus prescriptive regulation.
“Around technology, prescriptive regulation can get really out of date very quick, and it can become really problematic when you use the prescriptive tool,” says Lindman. “But they come with predictability. And then on the other end of the spectrum, you’ve got principles-based regulation, which is highly flexible and amenable to a lot of different circumstances.”
Regulation Crypto Assets reflects exactly this philosophy. Its disclosure requirements are explicitly principles-based: issuers disclose the material information appropriate to their circumstances. The proposed safe harbor, by contrast, creates a more prescriptive pathway for determining when an investment contract has ended.
During a meeting with the SEC on August 4th, we were able to see further evidence that this SEC is interested in principle-based regulation for vault operators.
If you’re a defi or crypto startup, it’s encouraging news. It means that you’d be able to comply with SEC regulation without the burden of a human intermediary or a return to unwanted centralization.
If you’re a vault operator, you should talk to us.
Verification without surveillance.
There is another reason this matters, and why it pays to be a policy nerd.
At the SEC’s December 2025 roundtable on financial surveillance and privacy, Chairman Paul Atkins explicitly pointed to zero-knowledge proofs as a technology that can allow people to demonstrate compliance without exposing their entire financial history or personal information.
Because we developed a novel implementation of zero-knowledge proof systems, Inherence tech is able to meet this need. Inherence proves that conditions are met without extraneous disclosure by either the party or the counterparty.
You can keep the underlying information private while making the fact that matters verifiable.
For a financial system increasingly built from software, that’s a potent new regulatory primitive.
The New Era.
Regulation Crypto Assets is not a rule yet. It’s still only a proposal. But it points toward a regulatory architecture in which these ideas become possible.
The longstanding crypto-regulation debate has often been framed as a choice between decentralization and investor protection.
It doesn’t have to be.
Removing an intermediary from execution does not require removing assurance from the system.
We can move the assurance somewhere else: into proof.
Maybe–just maybe–the new model will ultimately give regulators something better than the old model. The same level of investor protection, but evidence that is more frequent, less invasive, and machine-verifiable.
We want to help crypto and defi startups gain regulatory legitimacy. We want to help you demonstrate both your value to and your protection of consumers. So let’s talk. Our ears and inboxes are always open.
Regulation tailor-made for the crypto (common) era. That’s a song worth singing.