Crypto Task Force Written Input

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.

Date Written Input Topic(s) Key Points
Etherealize

Modernizing Transfer Agent Rules for U.S. Leadership in Tokenized Securities 		Custody, RFI Responses, Safe Harbor, Security Status, Tokenization
  • The memo urges the SEC to issue interpretive guidance clarifying that ancillary actors in decentralized blockchain systems are not considered transfer agents.
  • It recommends using the SEC's exemptive authority to create blockchain-based exemptions to existing transfer agent registration mandates.
  • The memo suggests exploring smart contract equivalency to fulfill specific transfer agent functions and establishing standards for blockchain record-keeping systems.
John A. Zecca, Nasdaq, Inc.

Re: What’s in a Name? A Stock by Any Other Name ... Nasdaq Inc.’s Response to “There Must Be Some Way Out of Here” 		Custody, Public Offerings, Regulatory Sandbox, RFI Responses, Safe Harbor, Security Status, Tokenization, Trading
  • The document emphasizes the need for a clear and predictable taxonomy for digital assets to ensure consistent regulation and avoid market distortions.
  • It advocates for a regulatory framework that balances innovation with investor protection, suggesting a light-touch regime for digital assets posing lower risks.
  • The document proposes the establishment of a temporary safe harbor for digital assets not yet clearly classified, allowing them to go to market quickly while pending definitive regulatory classification.
KPMG LLP

RE: Request for response to Crypto Task Force questions 		Custody, Security Status, Tokenization, Trading
  • The document emphasizes the need for clarity in market structure, registration, exchanges, and custody to strengthen the foundation for engaging in the crypto industry.
  • It highlights the importance of principles-based guidance and the role of independent standard-setters like FASB, PCAOB, and AICPA in developing and amending crypto asset accounting and auditing standards.
  • The document discusses the unique auditing challenges presented by crypto assets and the need for clear guidance on what constitutes reliable audit evidence, particularly from decentralized blockchains.
StartEngine

Recommendations from StartEngine on Regulatory Reforms to Support the Tokenization of Securities 		Custody, Public Offerings, Tokenization, Trading
  • Raise the Reg CF cap from $5 million to $50 million and the Reg A limit from $75 million to $250 million.
  • Permit the issuance and trading of tokenized securities under Reg CF, Reg A, and Reg D.
  • Waive Blue Sky compliance for all secondary transactions conducted on SEC-registered ATSs.
Cardano Foundation

Re: Comments on Commissioner Hester M. Peirce’s Statement / Crypto Task Force Questionnaire 		Custody, Public Offerings, Safe Harbor, Security Status, Tokenization
  • The Cardano Foundation advocates for a functional and risk-based taxonomy for blockchain assets, arguing against using decentralization as a criterion for determining whether a blockchain asset is a security.
  • The Foundation emphasizes the importance of regulatory interoperability, suggesting that the SEC align U.S. frameworks with international standards like MiCAR.
  • The Foundation proposes a technology-neutral approach to tokenization, highlighting its potential to enhance market efficiency and transparency.
AICPA

RE: Request for Comment on There Must Be Some Way Out of Here 		Crypto Lending, Custody, Regulatory Sandbox, Security Status, Tokenization, Trading
  • The AICPA emphasizes the need for clear accounting and auditing guidance for digital assets, highlighting the importance of collaboration with FASB to establish standards.
  • The AICPA's Auditing Subgroup is focused on developing guidance for auditors of entities that hold or transact in digital assets, with specific attention to client acceptance, risk assessment, and valuation.
  • The Attestation Subgroup is working on criteria for stablecoin reporting and controls, aiming to enhance transparency and build trust among stakeholders.
Amar Purushotham Bhat

SUBJECT: - Laws/Rules for preventing fraud by Centralized Exchange acting as Crypto Custodian 		Custody, Security Status
  • Wazirx, a centralized cryptocurrency exchange, was hacked, resulting in the theft of $234 million worth of ETH and ERC20 tokens.
  • Wazirx's claim of fungibility across different blockchains to justify withholding unaffected non-Ethereum crypto assets is misleading and false.
  • Request for the US SEC to formulate laws to prevent misuse of users' crypto assets by centralized exchanges acting as custodians.
ComBoox DAO LLC

How To Build A New Web3.0 Financial Market 		Custody, Security Status, Tokenization, Trading
  • The document proposes using blockchain and smart contracts to record property rights and automatically control legal acts, eliminating human intervention and addressing issues like minority shareholder protection and insider control.
  • It introduces a system architecture consisting of three types of smart contracts: Registers, Code of Conduct, and Keeper of Books, to automate the control and recording of book-entry assets and commercial legal acts.
  • The implementation method involves deploying smart contracts onto the blockchain network, setting up access control configurations, and validating preconditions for legal acts to ensure compliance with predefined rules
OpenZeppelin

Recommendations Regarding Independent Security Audit Reports 		Custody, RFI Responses, Safe Harbor, Security Status, Tokenization, Trading
  • Implement mandatory third-party security audits for blockchain protocols to ensure compliance with security standards and reduce risks.
  • Require detailed documentation of protocols, including governance mechanisms, technical specifications, and security measures.
  • Establish a global organization to formalize auditing standards and certify qualified auditors for blockchain technology.
Neel Maitra, Dechert LLP

Crypto Asset Custody By Investment Advisers After The Sec’s Proposed Safeguarding Rule 		Custody, Safe Harbor, Security Status, Tokenization, Trading
  • The SEC's proposed Safeguarding Rule aims to expand the Custody Rule by requiring RIAs to maintain all client assets, including crypto assets, with qualified custodians.
  • The Safeguarding Rule introduces new definitions for "possession or control" of assets and specifies several assurances that RIAs must receive from custodians.
  • The Rule proposes exemptions for certain assets, such as privately offered securities and physical assets, from the qualified custodian requirement, provided specific conditions are met.