From "regulatory safe harbor" to structural compliance: how crypto projects navigate the SEC's new rules

The Regulatory Shift of 2025: When Uncertainty Becomes Opportunity

2025 marks a crucial inflection point for the digital assets sector in the United States. After years of reactive enforcement-based approaches, the SEC under the leadership of Chairman Paul Atkins has reversed course by launching the “Crypto Project” in July of the same year. The declared goal is twofold: modernize the securities regulatory framework and position the US as the epicenter of global innovation in digital assets.

The core of this transformation lies in the Innovation Exemption policy, designed as a temporary derogation mechanism that allows crypto companies to accelerate their entry into the American market with reduced initial compliance burdens. The effective date has been set for January 2026. This paradigm shift signals a decisive move by authorities toward a more sustainable balance between investor protection and innovation drive.

How the Innovation Exemption Works in Practice

The operational framework and application timeline

The exemption is not a license to operate without rules but an accelerated pathway. Candidate projects—whether decentralized exchanges, stablecoin issuers, DeFi protocols, or even DAOs—are granted an operational window ranging from 12 to 24 months, based on achieving specific decentralization milestones.

During this period, the meaningful disclosure radically changes: project teams are not required to complete the complex traditional S-1 registration but instead submit a simplified disclosure. This approach resembles the “on-ramp” model envisioned by the CLARITY Act discussed in Congress, which would allow startups to raise up to $75 million annually from the public without fully exceeding SEC limits, provided they meet essential informational requirements.

Principles-Based Compliance Constraints

Atkins emphasized that this exemption will follow principles-based logic rather than strict rules. This means flexibility, but not anarchy. Projects will still need to:

• Submit quarterly operational reports and undergo periodic SEC reviews
• Implement investor protections for retail segments, including risk notices and limits on investable amounts
• Potentially adopt specific technical standards, such as whitelists of certified participants or compliant protocols like ERC-3643 that incorporate identity verification within smart contracts

The Exit Path: “Sufficient Decentralization”

The SEC has introduced a new classification system for digital assets based on the Howey test. Assets are divided into four categories: network/commodity tokens (like Bitcoin), utility tokens, collectible (NFT), and tokenized securities.

The key mechanism is this: if one of these assets meets verifiable criteria of functional decentralization or balanced tokenomics distribution, it can exit the securities regulatory framework. Once the “investment contract” is deemed concluded—even if the token was initially issued as a security—subsequent transactions are not automatically considered “security trading.” This creates an explicit regulatory exit ramp, different from the past ambiguity.

The Complementary Legislative Architecture: CLARITY Act and GENIUS Act

The Innovation Exemption does not operate in isolation. It integrates with two legislative pillars that are redefining the US ecosystem.

The CLARITY Act: resolving jurisdictional conflicts

For years, the SEC and CFTC have contested jurisdiction over crypto assets. The CLARITY Act draws a clear line:

• Primary phase and fundraising: under SEC supervision
• Spot trading of digital commodities: under CFTC
• Mature blockchain testing: a new criterion measuring whether a project has achieved sufficient decentralization (like token distribution, broad governance, independence from control groups)

The Innovation Exemption acts as an administrative transitional period during this “intentional maturation” phase. Project teams can raise funds and experiment with simplified disclosure while working toward decentralization criteria that will open the door to a lighter CFTC regime.

The GENIUS Act: the definitive framework for stablecoins

Signed into law in July 2025, the GENIUS Act represents the first comprehensive federal regulation of digital assets in the US. For stablecoins, the message is crystal clear:

• They are excluded from the federal definition of “security” or “commodity”
• Fall under banking supervision (OCC)
• Must maintain 1:1 reserves in highly liquid assets (only US dollars and government securities)
• Paying yields to holders is prohibited

Since the GENIUS Act has already clarified rules for payment stablecoins, the Innovation Exemption focuses on more bleeding-edge sectors: DeFi, new network protocols, and still experimental Web3 solutions.

Inter-agency Coordination: SEC and CFTC together

Both authorities have announced enhanced coordination through joint statements and dedicated roundtables. A joint declaration clarifies that platforms registered with both agencies can facilitate spot trading of certain crypto assets, recognizing the need for liquid markets and operators’ freedom to choose trading venues.

Concrete Opportunities for Compliant Startups and Institutions

The Innovation Exemption opens prospects that would have been unthinkable two years ago.

Lower Entry Costs

Historically, a crypto project wishing to operate legally in the US faced legal fees in the millions of dollars and a compliance phase lasting over 12 months. The exemption, by simplifying meaningful disclosure and registration processes, drastically reduces these timelines and costs.

Attraction of Institutional Capital

A transparent regulatory pathway would recalibrate decisions by companies that previously chose to “migrate” to foreign jurisdictions to escape American uncertainty. Regulatory certainty attracts venture capital and large investors who had previously remained cautious.

Acceleration of Product Innovation

The exemption period creates a legitimate experimental space. DeFi applications, new tokenomics mechanisms, and Web3 solutions can be tested quickly and at scale. Companies like ConsenSys benefit directly in a less restrictive environment.

Entry of Traditional Financial Institutions

JPMorgan, Morgan Stanley, and other major banks had been waiting for regulatory signals. The removal of SAB 121 (a accounting standard requiring custodians to record clients’ crypto assets as liabilities), combined with the administrative flexibility of the Innovation Exemption, reduces regulatory capital costs. Banks can now offer institutional-scale crypto custody services with more predictable legal pathways.

The Controversial Debate: The Risk of “Traditionalizing” DeFi

Not all sectors welcome the exemption. Significant concerns arise about its compatibility with decentralized principles.

The Mandatory Implementation of KYC/AML in Protocols

The controversial novelty: all projects utilizing the exemption must implement “reasonable user verification procedures.” For DeFi protocols, this means KYC/AML at the smart contract level. The logical consequence: liquidity pools segmented into “authorized pools” (for verified users) and “public pools” (more limited), with token standards like ERC-3643 that incorporate whitelists and transaction freezing.

Uniswap’s founder and other industry leaders have publicly criticized this approach, arguing that turning software developers into financial intermediaries threatens American competitiveness and stifles open-source innovation.

The crucial question: is it still DeFi?

If every transaction requires centralized whitelist verification and tokens can be frozen by an entity, decentralization becomes purely semiotic. Here, community frustration with crypto’s decentralization ideals becomes fully evident.

Opposition from Traditional Financial Institutions

Ironically, Wall Street has also voiced criticism. The World Federation of Exchanges (WFE) and Citadel Securities have sent letters to the SEC urging abandonment of the Innovation Exemption, arguing that two regulatory regimes for the same asset would create unacceptable regulatory arbitrage.

The Securities Industry and Financial Markets Association (SIFMA) emphasizes that tokenized securities require the same investor protections as traditional financial instruments. Their concern: regulatory easing could amplify fraud risks and market volatility.

The Global Landscape: Flexible US vs. Rigid Europe

The US Innovation Exemption diametrically opposes the European Union’s model, embodied by MiCA (Markets in Crypto-Assets Regulation).

Diverging Regulatory Philosophies

US Model: elimination of initial uncertainty and higher risk exposure in exchange for speed and flexibility. Particularly attractive for small to medium-sized startups and fintechs that can iterate rapidly.

MiCA Model: structural guarantees, uniform rules across Europe. Offers predictable stability, ideal for large financial institutions like JPMorgan seeking operational certainty and consistent compliance.

Operational Consequences: the Need for Dual Compliance

Global companies must craft “market-to-market” strategies. For example, a dollar-pegged stablecoin must meet vastly different criteria in the US (GENIUS Act) and in Europe (MiCA), with radically different classifications, reserve requirements, and disclosure burdens.

This regulatory fragmentation does not disappear; rather, it becomes institutionalized.

The Practical Roadmap for Project Teams

For those aiming to leverage this window, strategic clarity must be paramount.

Phase 1: Entry Window (12-24 months)

Startups should view the exemption period as a low-cost opportunity to quickly enter the US market. But they must simultaneously develop a verifiable decentralization roadmap based on concrete metrics—not vague “ongoing efforts.”

Teams that fail to meet tangible decentralization criteria within the allotted time will face significant retroactive compliance risks. The SEC will be unequivocal: either you are building truly decentralized infrastructure or you are not eligible for the exemption.

Phase 2: Exiting the Exemption

Here, a bifurcation emerges:

• Projects with verifiable decentralization: transition toward the lighter CFTC regime, with reduced burdens and less discretionary oversight
• Projects unable to fully decentralize or reject compliant standards like ERC-3643: must consider exiting the US retail segment. The B2B institutional market remains, but retail public access is off-limits.

Phase 3: Building a Solid Compliance Foundation

The meaningful disclosure—how teams communicate risks, governance structures, on-chain technical data—becomes a competitive asset. Projects that develop granular, up-to-date, and understandable disclosures gain credibility with investors and authorities.

Market Outlook and Global Convergence

The Innovation Exemption marks the transition from the “ambiguous repression” of old times to “clear regulation.” The SEC compensates legislative delays with administrative flexibility, offering digital assets a transitional path toward compliance without losing operational vitality.

However, global regulatory fragmentation remains significant. The US-Europe divergence will likely continue to favor regulatory arbitrage at least until 2029-2030. By then, a possible convergence toward common standards (uniform AML/KYC, consistent stablecoin reserve requirements) could emerge, facilitating interoperability and institutional adoption worldwide.

The Conclusion: Compliant Innovation as a Key Competence

This exploratory opening signals the end of uncontrolled growth in crypto. “Compliant innovation” will become the distinctive capability to navigate market cycles and global jurisdictions.

The next phase of cryptocurrencies will no longer be rooted solely in code. It will depend on the ability to clearly structure asset distribution, the robustness of the compliance foundation, and the capacity to move toward verifiable decentralization while leveraging the speed of the exemption.

Success will not be a matter of isolated technology but of transforming regulatory complexity into a competitive advantage in global markets. Projects that do not grasp this logic will remain trapped in the old narrative; those who do will reach a new category of structured, legitimate, and institutionalized assets.