Disclosure is all you need

Regulation Crypto Assets is finally here. All 402 pages of it.

Mercifully, there’s no need to read the whole thing.

“The proposed offering regime is intended to facilitate capital formation and accommodate innovation within the crypto asset markets while, at the same time, ensuring that investors are adequately protected and provided with the information they need to make informed investment decisions,” the summary explains.

To "accommodate innovation,” the SEC proposes two exemptions that would allow new crypto projects to issue tokens to users and investors without running afoul of securities laws.

That will be the part that gets the most attention: Crypto founders will finally be able to raise capital by selling tokens. In America!

To ensure American investors are “adequately protected,” the SEC proposes that anti-fraud laws apply, irrespective of exemptions, and that “bad actors” are disqualified from participating.

This is kind of obvious: An exemption from securities law is not an exemption from the rest of the law. Fraud is still fraud.

To provide investors “with the information they need to make informed investment decisions,” the SEC proposes that issuers relying on either exemption make “principles-based narrative disclosures” publicly available.

This is almost the SEC’s whole job: ensure that investors are fully informed, and then stay out of the way (mostly).

Or that’s what the job was meant to be, at least. 

Here’s part of the message President Franklin D. Roosevelt sent to Congress in 1933 when lawmakers were debating how the federal government should regulate securities:

In short, FDR told Congress the SEC should be founded on a principle of “disclosure regulation”: It should protect investors primarily by ensuring they have the information they need to make informed decisions.

That’s not the only way to do it, though. At the time, most US states took the opposite approach: “merit regulation” — where regulators judge securities on their perceived merit as investments.

In Texas and Wisconsin, for example, regulators could — and often did — block proposed securities offerings because they deemed the securities to be overpriced or otherwise unfair to investors. 

The SEC, by contrast, judges proposed offerings only by the quality and completeness of their disclosures. 

That light-touch approach was inspired by legal scholar Louis Brandeis, who wrote in 1914 that securities should be regulated like food. The Federal Pure Food Law, he explained, does not guarantee the quality or price of food. Instead, it empowers consumers to judge quality for themselves by requiring disclosure of ingredients.

He argued that would work for securities, too, as long as the information was readily available:

“Sunlight is said to be the best of disinfectants,” he added; “electric light the most efficient policeman.”

When the SEC was created two decades later, its first commissioner, Joseph Kennedy, explained that it would be following Brandeis’ guidance: 

Now, gentlemen, the Securities Act does not put the Government into business as a judge of values. It does not advise; it does not approve. What does it do? you may ask. The act provides a department with which must be filed information submitted by corporate officers in answer to required questions. Before you can be asked to invest your money in a business, there must be a record in Washington of the important facts which should guide your judgment.

The SEC has not always stuck to that founding principle, however.

In a 2024 speech, SEC Commissioner Hester Pierce accused the agency of straying from its original mandate of regulation by disclosure:

She added that “Congress did not design the SEC to be a merit regulator,” and concluded by urging the agency to return to its original disclosure-centric mandate.

Now, it has.

Regulation Crypto Assets represents a return to the SEC’s founding principle that disclosure enables investors to evaluate risk for themselves.

Setting a standard

The SEC’s proposal mandates disclosure for crypto projects selling tokens under an exemption. It does not mandate how disclosures should be made. 

It’s unclear whether the final regulation will include rules on how to disclose. The SEC might instead choose to recognize standards set by an industry group, as it does with accounting and compliance rules. 

Either way, though, the commission will have a growing industry effort to use as inspiration: Blockworks’ Token Transparency Framework (TTF) — the first open-source disclosure standard for digital assets.

75 protocols have voluntarily filed standardized disclosure documents with the TTF since its June 2025 launch.

The TTF’s “B-1” is a one-time filing made around the time a token is first traded, in the same way companies file an S-1 ahead of an IPO. 

(That’s Bob Woodward and Carl Bernstein looking through some B1s in the photo above.)

The B-2 is a filing to keep the information current, like companies do with a 10-K.

(“B-K” would have been too evocative of hamburgers, I guess?)

69 industry participants — exchanges, custodians, and asset managers — have joined The Transparency Alliance, a group working with Blockworks to set a common disclosure standard for digital assets.

Perhaps more importantly, those participants — representing more than $400 billion of combined market capitalization — are already using TTF filings as a core input in their due-diligence process.

For asset managers, the filings will be only the beginning of an investment process that requires them to do their own research (as the saying goes).

“Each filing is assessed for completeness,” Blockworks explains, “not quality.”

Good. 

FDR would say that’s all we really need.

— Byron Gilliam