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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.
Proposes the creation of a Federal Reserve HBAR Reserve & Lending Facility (HRLF), enabling HBAR-denominated loans for infrastructure, energy, and housing, with repayment terms and custody hardened under a Post-Quantum Financial Infrastructure Framework (PQFIF).
Assigns the SEC responsibility for monitoring issuance, custody, and lending structures involving HBAR, ensuring regulatory compliance within a post-blockchain framework.
Advocates for a national program (“HBAR in American Homes”) encouraging U.S. households to accumulate HBAR as a pro-dollar collateral layer, aiming to decentralize supply and reinforce U.S. monetary sovereignty.
Wintermute urges the SEC to affirm that broker-dealers may trade tokenized securities for their own account, self-clear and settle such trades, and custody proprietary positions using wallet software, without triggering customer protection rules.
The SEC should clarify that providing liquidity or trading tokenized securities on DeFi protocols—whether by U.S. or non-U.S. participants—does not, by itself, require broker-dealer registration or trigger U.S. jurisdiction, absent targeted solicitation.
The SEC should confirm that network tokens (e.g., Bitcoin, Ethereum), which are essential to decentralized protocols, are not securities under the Howey Test, even if initially distributed in fundraising transactions or traded speculatively.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization
Cryptocurrencies, despite lacking traditional security characteristics, should be subject to disclosure and protection standards akin to those under the Securities Act of 1933 and the Investment Company Act of 1940 due to their accessibility to unsophisticated investors.
The absence of intrinsic value, backing, or cash flow in cryptocurrencies makes them particularly risky and difficult to value using conventional corporate finance methods, necessitating enhanced regulatory scrutiny.
The SEC is urged to initiate a formal notice-and-comment rulemaking process to ensure inclusive public participation and to establish clear regulatory frameworks that promote responsible innovation and market integrity.
Lilya Tessler and Kate Lashley, Sidley Austin LLP on behalf of Ava Labs, Inc. and Owl Explains
Ava Labs proposes a new regulatory category—“Protocol Tokens”—defined as intangible, commercially fungible assets integral to the functioning of a protocol. These tokens should not be classified as securities, regardless of whether they are in a pre-functionality or functional state.
The SEC should adopt a rulemaking framework that presumes offers and sales of Pre-Functionality Protocol Tokens are investment contracts, but allows for rebuttal and provides a new exemption (“Regulation PT”) with tailored disclosure, AML/KYC, and filing requirements.
SEC-registered intermediaries (e.g., broker-dealers, ATSs, NSEs) should be permitted to support Protocol Token activities under existing frameworks, with targeted amendments and interpretive guidance. A transitional grace period should allow such activities pending final rulemaking.
Custody, Public Offerings, Safe Harbor, Security Status, Tokenization, Trading
Paradigm urges the SEC to issue interpretive guidance confirming that tokenized securities retain their status as securities under federal law, ensuring that blockchain-based issuance does not alter legal obligations under the Securities Act or Exchange Act.
The letter recommends that the SEC clarify and potentially revise transfer agent and recordkeeping rules to accommodate blockchain-based systems, including allowing issuers to act as their own transfer agents and recognizing distributed ledgers as official books and records.
Paradigm proposes updates to registration forms (e.g., Form S-1) and ongoing disclosure requirements to reflect the technical specifics of tokenized securities, including smart contract features, custody mechanisms, and onchain governance, while maintaining investor protection standards.
The OTCM Protocol employs a novel “Howey Shield” framework to ensure its tokens do not meet the definition of a security under the Howey Test, emphasizing the absence of profit expectation and managerial reliance, thus classifying tokens as commodities.
The protocol integrates SEC-registered intermediaries (e.g., Empire Stock Transfer) for custody and compliance, aligning with February 2025 SEC guidance on meme tokens and reinforcing investor protection through professional custody and full KYC/AML procedures.
The OTCM model is proposed as a regulatory template for future safe harbor provisions, demonstrating how asset-backed, entertainment-purposed tokens can operate within existing legal frameworks while revitalizing illiquid markets.
Custody, Public Offerings, Security Status, Tokenization
The letter urges the SEC to distinguish between fundraising tokens (which should be regulated as securities) and protocol/utility tokens (which should not), to avoid overregulation of decentralized infrastructure.
It advocates for treating smart contracts as neutral software infrastructure rather than financial instruments, emphasizing their role in automating logic rather than raising capital.
Firepan emphasizes that software providers like itself should not be subject to securities regulation when they do not engage in custody, compliance, or issuance—those roles should remain with licensed financial entities.
The document discusses the significant role of central banks and government policies in financial crises, highlighting the federal bailout of Fannie Mae and Freddie Mac during the 2008-2009 financial crisis.
It emphasizes Bitcoin's aim to establish a decentralized digital currency, independent of traditional financial institutions, through a peer-to-peer network that validates transactions without a trusted third party.
The document addresses the regulatory challenges faced by Bitcoin, including its use in illicit activities and the government's ability to seize and auction Bitcoin, demonstrating that decentralized systems are not immune to regulation.
James Q. Walker, Lowell D. Ness, Arthur S. Greenspan, Valeska Pederson Hintz, Zeeve Rose, Kiran Gill, Perkins Coie LLP
Custody, Public Offerings, Safe Harbor, Security Status, Tokenization, Trading
The SEC’s Division of Corporation Finance concluded that proof-of-work (POW) mining activities do not constitute the offer and sale of securities under federal securities laws.
The proof-of-stake (POS) validation process should not be considered an investment contract security under the Howey test, as rewards are compensation for technical validation services, not profits based on the efforts of others.
The issuance of liquid staking tokens (LSTs) should not be considered the offer or sale of a new security, as they are temporary stand-ins for the original staked crypto assets.
Statter Network will issue its native token, STT, through mining without an ICO. The token will be used for DAO governance, allowing token holders to participate in decision-making processes.
Statter Network employs a cross-chain bridge to facilitate the transfer of tokens, smart contract instructions, and information between different blockchains, ensuring interoperability and value exchange.
Statter Network ensures user privacy and transaction confidentiality through multiple layers of protection, including permission control, access authentication, and encrypted storage. It also uses a Segmented Proof of Work (SPoW) consensus mechanism to balance fairness and low energy consumption.
