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
Jason Berkun, George Washington University Law School

Re: A Legal Basis for Interpreting the Definition of an Exchange to Exclude a Decentralized Exchange Operating an Automated Market Maker 		Crypto Lending, Custody, Security Status, Trading
  • The Securities Exchange Act of 1934's definition of an "exchange" does not extend to decentralized exchanges (DEXs) operating automated market makers (AMMs) because peer-to-peer transaction protocols do not resemble traditional stock exchanges.
  • Registration and regulation frameworks intended for stock exchanges are incompatible with DEXs and fail to provide adequate investor protections for using a DEX.
  • Congress should amend the Exchange Act to provide tailored regulatory oversight of securities transactions on DEXs.
John Schoenecker, Taxbit

RE: Written Input to the Crypto Task Force 		Custody, RFI Responses, Safe Harbor, Security Status, Trading
  • The PROOF Act introduced by Senators Tillis and Hickenlooper requires digital asset exchanges and custodians to submit periodic proof of reserves (PoR) inspections by a neutral third party to the Treasury.
  • Real-time on-chain PoR reporting can prevent misappropriation of assets, as demonstrated by the FTX scandal.
  • Auditors of digital assets should verify them by tracking and confirming their existence on entity-owned and controlled blockchain wallet addresses.
Kechang Lai, Knowpia Inc.

Recommendation Letter - Supplementary Clarification No. 3 - Recommendation for Operational Structure and Clarification of STO+, ST, and ST+ Mechanisms 		Custody, Security Status, Tokenization, Trading
  • ST tokens are subject to lock-up periods under Reg D, Reg CF, and other relevant securities laws.
  • KYC and AML verification are mandatory for all ST token holders before receiving their tokens.
  • Smart Contracts govern the issuance, transfer, and conversion of ST and ST+ tokens, ensuring compliance with SEC regulations.
Ronald Hale

Letter to the Crypto Task Force 		Custody, Public Offerings, Regulatory Sandbox, Security Status, Tokenization, Trading
  • The SEC should implement a ban list of individuals and entities known for exploiting investors, similar to stock market practices, and require regulated entities to screen against it.
  • Stablecoins need regular auditing and reserve transparency, while meme coins should face stricter scrutiny due to their speculative nature.
  • DAOs should have clear governance and voting transparency, and mining regulations could promote sustainable practices.
     
Global Legal Entity Identifier Foundation (GLEIF)

A Response by the Global Legal Identifier Foundation (GLEIF) to the Securities and Exchange Commission’s Crypto Task Force 		Custody, RFI Responses, Security Status, Tokenization, Trading
  • The LEI (Legal Entity Identifier) is a 20-character, alpha-numeric code based on the ISO 17442 standard, which uniquely identifies a legal entity and is nonproprietary.
  • The vLEI (Verifiable Legal Entity Identifier) is a cryptographically verifiable version of the LEI, providing automated and nonrepudiable verification of an organization’s identity and the persons acting on its behalf.
  • The costs of obtaining and renewing an LEI are governed by a cost-recovery model, requiring review and approval by GLEIF.
Figure Markets

Submission to SEC Crypto Task Force 		Crypto Lending, Custody, Public Offerings, Regulatory Sandbox, RFI Responses, Safe Harbor, Security Status, Tokenization, Trading
  • The SEC should clarify the security status of crypto assets like stablecoins, wrapped tokens, and NFTs to foster innovation and protect investors.
  • Tailored disclosure requirements for specific non-security crypto asset categories should be established to ensure transparency and investor protection.
  • A safe harbor provision, such as Rule 195, should be considered to encourage blockchain development within regulatory parameters.
Alternative Investment Management Association (AIMA)

Re: AIMA written input to the SEC’s Crypto Task Force 		Crypto ETPs, Crypto Lending, Custody, Public Offerings, Regulatory Sandbox, RFI Responses, Safe Harbor, Security Status, Tokenization, Trading
  • AIMA recommends the SEC adopt a clear, principles-based regulatory approach toward crypto assets, recognizing their diverse nature and use cases.
  • AIMA urges the SEC to provide clear custody guidelines for RIAs and other institutional investors, emphasizing the need to withdraw the proposed Safeguarding Rule.
  • AIMA suggests that the SEC consider adopting a version of Rule 195 to provide clarity on when a token sale ceases to be an investment contract and when a network achieves sufficient decentralization.
Bruce Tupper, CoinRegTech

RE: SEC Crypto 2.0 Formation of New Crypto Task Force 		Custody, RFI Responses, Security Status, Tokenization, Trading
  • The SEC should address investor protection and market structure issues involving digital asset securities facilitated by off-chain transactions on trading platforms.
  • The SEC and CFTC should jointly authorize and regulate a digital asset repository of transactions (DART) to record both on-chain and off-chain transactions and associated customer ownership.
  • The SEC should revise the Exchange Act rules to require timely reporting of all transactions deemed digital asset securities to enhance market oversight.
Ronald Hale

Letter to the Crypto Task Force 		Custody, Public Offerings, Regulatory Sandbox, Security Status, Tokenization, Trading
  • The proposed framework introduces the "Satoshi test" to classify crypto assets, focusing on investment of value, centralized control, expectation of returns, efforts of others, decentralization level, and transparency.
  • Regulatory components include guidelines for development and governance, classification of coins and tokens, oversight of economic activities like staking and mining, funding mechanisms, and standards for trading platforms and wallets.
  • Recommended investor protection measures include education campaigns, dispute resolution mechanisms, compensation funds or insurance for fraud victims, and international collaboration to address cross-border crypto issues.
     
Ripple

Letter to the Crypto Task Force 		Custody, Regulatory Sandbox, RFI Responses, Safe Harbor, Security Status, Tokenization, Trading
  • The SEC lacks authority over most digital assets and transactions involving them, as it can only regulate "securities" and transactions involving securities as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934.
  • The application of the Howey test under the prior administration was distorted, leading to market disruption and driving innovation outside the United States.
  • The SEC should confirm that staking and yield-generating arrangements dependent on the programmatic functioning of a public, permissionless network that do not involve a definable issuer or counterparty making investment commitments are not considered securities.