Zcash policy group asks SEC to limit wallet disclosure in proposed crypto rule

What the SEC proposed

The SEC's proposal, issued Aug. 18, would create a startup exemption for offerings of up to $5 million over four years and a fundraising exemption for up to $75 million over 12 months, as CryptoSlate described it. Eligible issuers would get a tailored route around securities registration requirements. Disclosures would still apply (so would federal antifraud and antimanipulation provisions).

Proposed Rule 103 sets the narrative disclosure requirements for issuers using those exemptions. Its paragraph (b)(7) covers material token economics and allocations, including supply, pricing, lockups, distribution methods, related-person holdings and release schedules. Other provisions cover the intended use of offering proceeds, management, related-person transactions and conflicts. Rule 103(a) says disclosure isn't required where a requirement is inapplicable or the information is unknown or not reasonably available.

As of Oct. 26, the SEC docket still listed it as a proposed rule, and the Oct. 20 comment deadline had passed.

What PGPZ wants changed

PGPZ's core argument is pretty simple. Evidence should answer the specific claim investors need checked. The group said proving a transaction obeyed a network's rules doesn't establish how an issuer spent investor money.

It wants a public account of material holdings and conflicts, backed by supporting evidence that doesn't expose unrelated financial activity (and it asked the SEC to make that approach explicit). PGPZ asked for an instruction that expressly allows accounting records, cryptographic proofs and selective disclosure, with issuers explaining what their chosen method verifies and its limitations. It also wants the agency to separate what investors need in public disclosures from supporting records an auditor or regulator may need to examine. Its request keeps applicable audit standards in place.

Then there's the question of keys.

PGPZ warned that a key can expose extensive financial activity even though it can't spend funds. The group asked for narrower evidence instead of making key access the default, plus a clarification that complete public histories or viewing and spending keys wouldn't be required.

Where Atkins fits in

SEC Chairman Paul Atkins has discussed the policy ambition behind this approach. He described zero-knowledge proofs, selective disclosure and wallet designs as tools for demonstrating compliance without surrendering an entire financial history. He also said those views were his own and not necessarily those of the SEC or other commissioners.

For now, the letter's suggested protections are requests for the final rule text, not an adopted compliance route.