In an effort to provide greater clarity for issuers operating in the digital asset space, the U.S. Securities and Exchange Commission’s Division of Corporation Finance released a statement on Thursday detailing its views on how existing disclosure requirements apply to offerings and registrations in the crypto asset markets. The guidance, issued on April 10, reflects the agency’s observations from recent reviews and aims to help market participants navigate federal securities laws when raising capital through blockchain-based assets.

This latest communication comes as Acting Chairman Mark T. Uyeda’s Crypto Task Force continues to work on a more comprehensive regulatory framework for crypto assets. While not legally binding, the Division’s statement outlines how issuers can fulfill their obligations under the Securities Act of 1933 and the Securities Exchange Act of 1934, particularly when dealing with securities that involve crypto assets or are tied to decentralized networks and applications.

According to the Division, issuers must clearly describe the material aspects of their business in a manner that avoids technical jargon and instead focuses on the specific operations of the company. This includes disclosing whether a crypto asset has a functional role in a network or application, the current stage of development, how the issuer intends to generate revenue, and what milestones remain before full implementation. If an issuer is building or managing a blockchain network or decentralized application, they should also provide a thorough explanation of how the system functions, including consensus mechanisms, governance processes, and any associated transaction fees.

The SEC is placing a strong emphasis on risk disclosures. Issuers are expected to outline not only the risks related to their own operations but also those associated with crypto asset volatility, limited investor rights, liquidity challenges, and the broader regulatory environment. The guidance notes that material risks can also stem from reliance on third-party networks or applications, and these dependencies should be made clear to investors.

The statement further underscores the need to describe the nature and structure of the securities being offered. This includes explaining the rights and obligations of token holders, how securities are transferred or redeemed, and whether they are subject to smart contracts or automated rules within a blockchain. Technical specifications such as wallet compatibility, smart contract audit results, and the process for modifying network code are also considered relevant disclosures. Issuers must disclose whether the crypto asset supply is capped or subject to change, who controls these mechanisms, and whether there are any arrangements to provide market liquidity.

For offerings involving tokens or crypto-related securities, the SEC expects issuers to submit the relevant smart contract or blockchain code as an exhibit. This requirement ensures transparency around the rules embedded in the network and helps investors understand how their rights are managed programmatically. Any changes to the code following the filing would require updated disclosures.

The Division also reminded issuers of the importance of naming key executives, directors, or significant employees responsible for managing the company. If a third-party entity performs these roles, as in the case of certain crypto trusts, relevant details about those individuals and the associated fees must be included.

Issuers are also required to provide compliant financial statements and may contact the SEC’s Office of the Chief Accountant for guidance on complex accounting questions. In cases where the code of a crypto asset defines investor rights, the issuer must file that code as an exhibit, and continue to update it if changes occur.