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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.
The broker‑dealer’s use of Dinari’s blockchain system is permissible only if the off‑chain books and records remain the authoritative records fully compliant with Exchange Act Rules 17a‑3 and 17a‑4, with on‑chain tokens serving strictly as secondary, non‑economic representations.
The blockchain‑based tokens must be entirely duplicative, non‑transferable, and without independent economic or governance rights to ensure they do not alter customer ownership rights or create a separate asset class.
Broker‑dealers must maintain policies and supervisory procedures ensuring continuous alignment between on‑chain and off‑chain records, including reconciliation and exception reporting to prevent false or misleading customer information.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization, Trading
SEC Release No. 33‑11412 establishes the binding five‑category digital‑asset taxonomy and confirms OTCM’s ST22 instruments as Category 1 Model B Digital Securities, with the DLT ledger serving as the authoritative shareholder record
OTCM’s migration from Preferred Series “M” shares to Common Class B Shares ensures full shareholder rights (voting, dividends, liquidation) and directly satisfies Model B’s requirement that tokenized securities represent true equity ownership.
Empire Stock Transfer is formalized as the sole qualified custodian and onboarding authority, centralizing KYC/KYB/AML/OFAC compliance and custody under SEC‑regulated oversight for all ST22 issuers.
The letter argues that existing exchange and ATS regulations cannot be automatically applied to disintermediated protocols because these systems lack core intermediary functions such as custody, order‑book operation, discretion, or agency on behalf of users.
It urges the Commission to distinguish between true intermediaries and neutral software or protocol developers, emphasizing that misclassification would impose technologically impossible obligations and effectively prohibit DeFi activity in the U.S.
The submission advocates for a function‑based, technology‑neutral regulatory framework—mirroring the Commission’s historic approach to emerging technologies—that maintains investor protection without forcing decentralized systems into legacy market‑structure models.
The letter urges the SEC to adopt a functional test for “facility” under the Exchange Act so that only technologies actually performing exchange functions fall within regulatory scope, thereby preventing overreach to DeFi software, AMMs, smart contracts, or developers.
It argues that “group of persons” should not be interpreted broadly; developers or entities lacking unified intent or control over exchange functions should not be regulated as an exchange merely because their software is used by one.
The letter maintains that DeFi technologies providing liquidity or autonomous functionality (e.g., AMMs, self-custodial tools) perform non‑exchange functions and therefore cannot be treated as exchange facilities or components of an exchange.
SIFMA (Securities Industry and Financial Markets Association)
AMM‑based trading of tokenized securities must be regulated based on function, not technology, ensuring that entities performing exchange, ATS, broker, or dealer roles—such as protocol deployers, governance bodies, significant liquidity providers, and front‑ends—are subject to corresponding federal securities law obligations.
AMMs introduce structural investor‑protection and market‑integrity risks (MEV/front‑running, slippage, oracle failures, pseudonymous trading, lack of surveillance, limited dispute resolution, liquidity fragmentation) that must be mitigated through mandatory controls, disclosures, AML/KYC application, and integration with existing market‑structure requirements.
To support compliant securities trading, AMM venues must incorporate price discovery, reporting, systems integrity, and operational resilience comparable to Regulation NMS and Regulation SCI, including reliable market data, transparent execution, and accountable entities capable of maintaining and upgrading smart‑contract trading systems
Digital‑asset documentation is often fragmented across exchanges, wallets, tax reports, platform statements, and user‑generated materials, creating evidentiary uncertainty in legal, fiduciary, and insurance contexts.
Because regulatory treatment may hinge on issuer representations, managerial efforts, and disclosures—not merely asset characteristics—the reliability and completeness of record sets materially affect legal determinations.
The absence of a neutral infrastructure for assessing completeness, consistency, and evidentiary sufficiency of digital‑asset records creates a procedural gap that impairs courts, fiduciaries, and counterparties in evaluating claims.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization, Trading
The SEC should continue developing a clear regulatory framework enabling broker‑dealers to custody, trade, and support crypto asset securities, including on ATSs, to reduce legal uncertainty and enable compliant market participation.
The SEC should issue bright‑line standards for tokenized securities, ensuring ATSs can rely on the regulatory status ascribed to a tokenized instrument—critical for avoiding unintended securities‑based swap or unregistered offering violations.
The SEC should provide regulatory clarity permitting on‑chain recordkeeping and settlement by broker‑dealers without triggering clearing‑agency status, enabling lawful integration of distributed‑ledger processes into securities market infrastructure.
SIFMA (Securities Industry and Financial Markets Association)
SIFMA urges that Regulations ATS and NMS must continue to apply fully to tokenized securities and on chain trading platforms, cautioning against lowering standards for crypto ATSs or exempting new entrants from established investor protection obligations.
Consistent registration requirements (exchange, ATS, broker dealer) are deemed essential for any on chain trading venue, as integration into SIPs/TRFs and market wide surveillance is impossible without formal regulatory status.
Price discovery, transparency, and post trade reporting must remain intact, including harmonized volatility controls and prevention of market fragmentation across tokenized, wrapped, and traditional securities trading environments.
The submission proposes a Structural Enforcement Standard that embeds legally binding transfer conditions, remedies, revocability, and dispute resolution terms directly into a token’s architecture, ensuring obligations survive every transfer and eliminating reliance on platform-level enforcement.
The model applies traditional trust law architecture—separating authority (trustee) from beneficial rights (beneficiary)—to digital assets through a dual layer token structure that enables automatic, on chain enforcement consistent with established legal doctrine.
The author urges the SEC to grant regulatory clarity and potential safe harbor for tokens adopting this structure, arguing it provides superior investor protection, clearer legal classification, and a scalable foundation for institutional tokenization.
Replace Rule 603’s prescriptive SIP-based consolidated display requirement with a principles-based “Fair Quote Presentation Rule” that focuses on anti-misleading standards, disclosure of data sources, and transparency rather than mandating a single data model.
Explicitly allow alternative, verifiable data sources—including cryptographically verifiable distributed ledger states, venue-native order books, and modern feeds like Pyth—for DeFi platforms, tokenized ATSs, and crypto-native venues under the Commission’s Innovation Exception framework.
Maintain investor protection through disclosure, timestamp integrity, and supervisory controls instead of enforcing reliance on centralized SIP infrastructure, which imposes cost and governance inefficiencies incompatible with modern markets.
