SEC Regulation Crypto Assets: What the Comment Period Means for DeFi Accounting

The public comment window on the SEC's proposed Regulation Crypto Assets closed this week with more than 100 submissions on file. Crypto-native firms, traditional Wall Street bodies, and industry associations all weighed in, and the gaps they exposed have direct consequences for how digital assets are classified, reported, and accounted for. For accounting firms, CFOs, and compliance teams with US exposure, the decisions now in front of the SEC will shape disclosure obligations, securities-law boundaries, and the viability of on-chain trading structures for years ahead.

What Regulation Crypto Assets Actually Proposes

The SEC's proposal is designed to create a defined legal pathway for certain digital asset offerings, carving out exemptions from full securities registration where specific conditions are met. Two thresholds sit at the centre of the framework.

The Startup and Fundraising Exemptions

A "startup exemption" would allow offerings of up to $5 million to skip registration requirements entirely. A broader "fundraising exemption" covers offerings of up to $75 million within a one-year window. Both are structured as safe harbours rather than absolute rights: issuers must still satisfy conditions that, as several commenters noted, not every project will be able to meet.

For accounting teams, the exemption thresholds matter because they determine whether an issuance triggers the disclosure and reporting obligations that attach to registered securities. Instruments that fall inside a valid exemption are treated differently on the balance sheet and in audit procedures than those that remain unregistered but unexempted. Getting this classification wrong carries real liability.

The Innovation Exemption and On-Chain Trading

Separately, the SEC introduced a long-awaited innovation exemption that took effect in September. It runs for five years and does two things. First, it allows certain trading venues, labelled "tokenized securities venues," to operate without being classified as an exchange under securities law. Second, it exempts specific liquidity providers from being defined as dealers when they supply liquidity through automated market makers, meaning smart contracts executing trades on-chain.

This is the provision that opens the door, at least on a time-limited basis, to on-chain trading of tokenised stocks in the US. The five-year horizon is long enough to allow market infrastructure to develop, but short enough that design choices made now will determine market practice well before any permanent framework arrives.

Who Submitted Comments and What They Want

The breadth of the comment pool reflects how consequential this rulemaking is. Submissions came from decentralised finance platforms, global asset managers, and the largest securities industry trade body in the US.

Hyperliquid Policy Center: Fix the Airdrop Treatment

The Hyperliquid Policy Center backed the proposal overall but flagged a specific problem with how airdrops are handled under the proposed safe harbour. Its submission asked the SEC to codify prior agency language confirming that airdrops in which no value is given in exchange for the token do not constitute an investment of money and therefore fall outside the definition of a security.

The centre's concern is practical: the proposal's new safe harbour includes a certification requirement that many token projects would be unable to make as written. If that certification cannot be satisfied, a project distributing tokens via airdrop could inadvertently step into unregistered securities territory, even where the economic substance of the distribution is closer to a marketing event than an investment offering.

From a DeFi accounting perspective, this matters because airdrop treatment affects whether received tokens are recognised as income at fair value on receipt, and whether the distributing entity records a liability or an expense. Without clear SEC guidance, preparers are left applying judgment under US GAAP or IFRS with no authoritative anchor, which creates inconsistency across engagements and audit risk.

AIMA: Investor Rights, Disclosure Clarity, and Manager Exposure

The Alternative Investment Management Association called for revisions that go to the heart of how issuers communicate what a token actually represents. AIMA's letter asked issuers to draw a clear distinction between utility or economic exposure on one hand, and ownership, redemption, cash-flow, and contractual rights on the other. It also recommended tailored event reporting and explicit guidance on how to handle information that is genuinely unavailable at the time of filing.

For investment managers with digital asset exposure, the AIMA submission highlights a real risk: where issuers fail to make these distinctions clearly, managers holding those instruments may inherit legal uncertainty that extends to their own fiduciary obligations. The comment also signals that institutional allocators will push for disclosure standards that are closer to what they expect in traditional markets.

SIFMA: Investor Protection and the Cost of Early Design Choices

The Securities Industry and Financial Markets Association took a sharper line on timing. SIFMA's submission argued that investor protection questions need to be resolved immediately rather than deferred, specifically because the five-year innovation exemption means that whatever market practices emerge early will become entrenched before any permanent rule is finalised. SIFMA also called for changes to the opt-in mechanism that governs how issuers elect into the exemption framework.

The underlying concern is structural: if the rules around tokenised securities venues are ambiguous, market participants will fill that ambiguity with their own interpretations, and correcting those interpretations later becomes significantly harder. For compliance teams building policies now, SIFMA's position is a signal to build in review triggers tied to the five-year exemption horizon rather than assuming the current framework will persist unchanged.

CFTC Developments Running in Parallel

The SEC's sister regulator, the Commodity Futures Trading Commission, is advancing its own agenda simultaneously. In August, the CFTC approved rules allowing Kalshi and Coinbase to offer perpetual futures in the US for the first time. The Hyperliquid Policy Center's Tuesday submission to the CFTC called for compute perpetual contracts, covering exposure to chip prices and AI data centre costs, to be brought within the US regulatory perimeter. The centre's argument is that developers renting compute capacity face real price risk with no available hedging instruments, and that the compute market remains fragmented and largely privately priced.

While compute perpetuals are not yet approved, the parallel CFTC push underscores the speed at which novel contract types are entering the US regulatory queue. For firms managing derivative exposures in digital asset portfolios, the derivatives accounting treatment under ASC 815 or IFRS 9 will depend on whether instruments are exchange-traded or over-the-counter, a distinction that changes completely once a contract gains CFTC approval.

Accounting and Reporting Implications for Firms

Securities Classification Drives the Entire Reporting Stack

Whether a digital asset is classified as a security determines almost everything downstream: which accounting standard applies, what disclosures are required, how the instrument appears on the balance sheet, and what audit evidence is needed. Under the SEC's proposed framework, the exemption thresholds and safe harbour conditions become classification inputs. Accounting firms advising clients on token issuances or holdings need to track which exemption, if any, applies and document that analysis contemporaneously.

The FASB's ASU 2023-08 already requires crypto assets meeting the standard's scope criteria to be measured at fair value through earnings each reporting period. But that standard explicitly excludes assets that meet the definition of a security under US law. If the SEC's Regulation Crypto Assets shifts more instruments into the "not a security" column, the population of assets subject to ASU 2023-08 measurement grows, changing how volatility flows through the income statement for entities holding those assets.

Digital Asset Accounting Software and Classification Workflows

Firms relying on digital asset accounting software to process token holdings will need their classification logic updated as the final rule takes shape. The startup and fundraising exemption thresholds, the airdrop carve-outs if the SEC adopts Hyperliquid Policy Center's position, and the treatment of liquidity providers under the innovation exemption all affect how individual transactions are tagged and reported. Waiting until the final rule is published before reviewing classification workflows creates a backlog risk, particularly for firms with large transaction volumes.

Building the classification review into the comment-period monitoring process, rather than treating it as a post-finalisation task, is the more defensible approach. That means mapping current holdings and issuances against the proposed thresholds now and flagging any positions whose treatment could change under the final rule.

Tokenised Securities Venues and the Dealer Exemption

The innovation exemption's exclusion of certain liquidity providers from the dealer definition has accounting implications that are easy to miss. Dealer status under securities law carries its own capital, reporting, and record-keeping requirements. An entity that falls outside the dealer definition because it operates through an automated market maker on a tokenised securities venue faces a different regulatory cost structure than one that does not. That cost difference affects how entities account for compliance expenditure and how they structure arrangements with liquidity providers.

Practical Steps for Compliance and Finance Teams

The comment period is closed, but the rulemaking process is not. The SEC will review submissions before issuing a final rule, and significant revisions remain possible given the volume and breadth of industry feedback. In the meantime, several actions are worth taking now.

Review Token Classifications Against the Proposed Thresholds

Map any token issuances or holdings against the $5 million startup exemption and $75 million fundraising exemption thresholds. Identify which positions sit close to the boundaries and would change classification if the SEC adjusts thresholds in the final rule. Document the analysis.

Assess Airdrop Treatment Policies

If the firm has received or distributed tokens via airdrop, review the current accounting policy against the uncertainty flagged by the Hyperliquid Policy Center's submission. The SEC has not yet resolved whether the safe harbour certification requirement will be relaxed. Until it does, the most defensible position is to treat the classification as uncertain and disclose accordingly, consistent with the principles underlying ASC 450 or IAS 37 for contingent obligations.

Monitor the Five-Year Exemption Calendar

The innovation exemption runs for five years from its September commencement. Set a review date for year two or three, well ahead of the expiry, to assess whether the firm's on-chain trading arrangements remain compliant as the SEC develops a permanent framework. SIFMA's submission makes clear that investor protection requirements may be tightened before the five years are up.

The broader US regulatory rewrite, spanning both the SEC and the CFTC, is moving faster than many compliance calendars anticipated. Firms that treat this rulemaking as a future problem are already behind the design choices being made in the market right now. Staying current on the full scope of the US crypto regulation rewrite in 2026 is essential for any team with American digital asset exposure. For context on how Hyperliquid itself has framed the regulatory debate around DeFi deployers, the Hyperliquid Jeff Yan piece on regulating the deployer, not the chain is directly relevant background.

Frequently Asked Questions

What is the SEC's Regulation Crypto Assets proposal?

It is a proposed SEC rulemaking that would create defined exemptions from securities registration for certain digital asset offerings. Key provisions include a $5 million startup exemption, a $75 million fundraising exemption, and a five-year innovation exemption allowing on-chain trading of tokenised securities at qualifying venues.

How does the proposed rule affect DeFi accounting?

The exemptions determine whether a digital asset is treated as a security under US law, which in turn drives which accounting standard applies, how the asset is measured, and what disclosures are required. The airdrop treatment question, if resolved as the Hyperliquid Policy Center recommends, would also affect income recognition for token distributions.

What did SIFMA object to in its comment letter?

SIFMA argued that investor protection questions need to be resolved at the outset of the five-year innovation exemption rather than deferred. It also called for changes to the opt-in mechanism for issuers and warned that early design choices will shape market practice long before any permanent rule is in place.

Does the innovation exemption affect how liquidity providers are classified?

Yes. The exemption excludes certain liquidity providers operating through automated market makers on tokenised securities venues from the dealer definition under securities law. Dealer status carries specific capital, reporting, and record-keeping requirements, so this classification distinction has material compliance cost implications.

What should accounting firms do while the final rule is pending?

Map current digital asset holdings and issuances against the proposed exemption thresholds, document classification analyses contemporaneously, review airdrop accounting policies against the unresolved safe harbour certification question, and set calendar alerts for the five-year innovation exemption horizon. Treat the classification for borderline instruments as uncertain and disclose accordingly until the SEC issues a final rule.

Source: The Block