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Please find written input submissions to the Crypto Task Force below. The written input is posted without modification. We hope sharing the submissions will help encourage productive dialogue and continued engagement. Please note that the “Key Points” and “Topics” are AI generated. AI can make mistakes, and the Key Points and Topics are not a replacement for you reading the submissions. The Crypto Task Force has not reviewed these AI-generated summaries for accuracy or completeness. If you believe a Key Point or Topic is inaccurate, please email the Crypto Task Force at crypto@sec.gov. The written input provided to the SEC and posted on this page does not necessarily reflect the views of the Crypto Task Force or others in the U.S. Securities and Exchange Commission.
Public Offerings, Security Status, Tokenization, Trading
The letter emphasizes that digital asset markets involve transactions between spot commodities and securities, necessitating a novel regulatory framework distinct from traditional finance.
CoinRoutes warns that imposing traditional market regulations (e.g., tick size, fee caps) on crypto markets could increase trading costs and reduce competitiveness, potentially pushing liquidity to less regulated international venues.
Effective monitoring of manipulative behaviors like momentum ignition requires integrated surveillance across both spot and derivative crypto markets—something not currently achieved in traditional equity markets.
Epistria, LLC - Proving What Didn’t Happen -SSRN Comprehensive Paper
Evidentiary compliance reframes legal compliance from procedural trust to cryptographic proof, enabling organizations to demonstrate not only what occurred but also what did not—addressing evidentiary gaps that traditional logs, attestations, and blockchains cannot fill.
Audit-Verifiable Compliance Receipts (AVCRs) and Relational Merkle Trees (RMTs) provide legally defensible proof of non-reachability, allowing entities to demonstrate that prohibited access paths or unauthorized interactions were structurally impossible.
Lifecycle receipts (CSTPs) and destruction proofs (EIVs) offer cryptographic evidence of compliance with data retention and deletion mandates (e.g., GDPR, HIPAA), enabling reconciliation of conflicting regulatory obligations through verifiable state transitions.
Epistria, LLC - When Digital Evidence of “Nothing Happened” Isn’t Good Enough
Courts lack clear standards for evaluating digital evidence that purports to prove a negative (e.g., no access, no transaction), making such evidence vulnerable to challenge and potentially unreliable in litigation.
As cryptographically generated “negative receipts” emerge, courts will need to assess them using technology-neutral criteria like authenticity, integrity, and chain of custody—while also developing new standards specific to negative proofs.
Portable digital artifacts proving non-occurrence may be discoverable, raising concerns about privilege waiver and confidentiality, especially when such artifacts reveal internal systems or were not created under legal direction.
Evidentiary asymmetry in crypto markets undermines enforcement because regulators cannot prove the absence of misconduct (e.g., wash trading, front-running), creating a persistent "evidentiary debt."
Cryptographic receipts of absence offer a novel compliance mechanism by mathematically attesting that prohibited activities did not occur within a defined scope, enhancing auditability and legal defensibility.
Mandating or endorsing such receipts would support the SEC’s goals of clear regulatory boundaries, tailored disclosures, and stronger investor protections through verifiable compliance.
Private blockchains operated by companies should be governed by internal corporate structures (e.g., boards), ensuring accountability and operational continuity.
Coins used within private blockchains for governance and utility purposes should not be classified as securities if not offered to institutional investors or traded on public exchanges.
Transparent transaction visibility on private blockchains can reduce the need for external regulatory oversight while maintaining stakeholder trust.
The proposal applies the Howey Test to IoT-enabled tokens, affirming that most tokenized physical assets—especially those offering fractional ownership and income rights—qualify as securities under U.S. federal law, thereby triggering SEC jurisdiction and compliance obligations.
The framework mandates that smart contracts embed securities law requirements, including automated enforcement of Regulation D holding periods, accredited investor verification, and transfer restrictions, ensuring immutable compliance with federal securities regulations.
A proposed Self-Regulatory Organization (SRO), under SEC supervision, would certify and oversee oracle operators, requiring them to meet technical, operational, and financial standards, including minimum capitalization, bonding, and compliance with AML/KYC and reporting obligations.
Bank Policy Institute, Association of Global Custodians, and Financial Services Forum
The SEC should not expand the definition of “qualified custodian” to include entities like state-chartered trust companies unless they are subject to regulatory oversight and prudential standards equivalent to those applied to banks.
Investment advisers should not be permitted to self-custody client crypto assets without full compliance with the Investment Advisers Act and related custody rules, as this would expose investors to heightened risks and conflicts of interest.
Any changes to the custody framework for crypto assets must maintain the core principles of asset segregation, separation of functions, and proper control to ensure investor protection and market stability.
Crypto ETPs, Public Offerings, Regulatory Sandbox, Security Status, Tokenization, Trading
Tokenized securities are treated as securities under U.S. law, and the framework ensures compliance with the Securities Act of 1933 and the Securities Exchange Act of 1934, including support for Regulation D, Regulation A, and Regulation S offerings, with programmable enforcement of transfer restrictions and disclosure obligations.
The framework enables registered transfer agents to maintain blockchain-based master securityholder files, in compliance with SEC Rules 17Ad-1 through 17Ad-23, allowing for tamper-resistant records, automated corporate actions, and privacy-preserving off-chain personal data storage.
The proposal includes a comprehensive AML/KYC compliance system using verifiable digital identities and smart contracts to enforce transaction-level compliance, integrated with OFAC screening and automated Suspicious Activity Report (SAR) generation, aligning with Bank Secrecy Act and FinCEN requirements.
The framework affirms that while the SEC lacks authority over primary sovereign debt issuance, it retains jurisdiction over secondary market activities involving tokenized sovereign debt, including trading platforms, public offerings (e.g., ICOs, STOs), and broker-dealer conduct, under existing securities laws.
All providers of tokenized sovereign debt instruments must obtain SEC certification, undergo formal verification of smart contracts, and comply with ongoing supervision requirements, including quarterly compliance attestations and annual third-party audits.
The framework mandates the use of SEC-certified regulatory oracles for real-time compliance verification and introduces a regulatory sandbox to allow conditional exemptions and phased compliance for innovative tokenization models, aligning with Project Crypto and international standards.
