Sep. 21, 2026
Dear Secretary Countryman: I am writing to submit a public comment regarding Proposed Regulation Crypto Assets (File No. S7-2026-27). As a full-stack software engineer with extensive experience developing autonomous systems and drone networks, I am deeply concerned about how the current language of this proposal impacts the intersection of distributed ledger technology (DLT), edge computing, and physical autonomous assets. While I applaud the Commission's effort to move away from regulation by enforcement, the proposed framework treats digital assets primarily as speculative financial vehicles. It fails to account for tokens used as functional, low-latency operational infrastructure for autonomous machines. I urge the Commission to consider the following technical friction points before finalizing this rule: 1. Functional Utility Tokens vs. Investment Contracts In decentralized drone and robotic networks, tokens are frequently used as automated, machine-to-machine micro-transaction vouchers. They pay for programmatic data exchanges, automated battery swaps, and localized peer-to-peer airspace deconfliction. Classifying these functional utility tokens as "covered investment contracts" during their early-stage deployment introduces immense legal friction. It effectively halts real-time, programmatic machine-to-machine capital formation. 2. The Flaw of "Managerial Efforts" in Autonomous Systems The Rule 400 Decentralization Safe Harbor relies on the concept of an issuer completing or permanently ceasing "managerial efforts" to prove decentralization. In autonomous systems, software engineers must push continuous firmware updates, safety patches, and geofencing adjustments to physical assets to ensure public safety and comply with Federal Aviation Administration (FAA) regulations. Under the current proposal, ongoing code deployment by a core engineering team could be misconstrued as continued "managerial efforts." This penalizes developers for maintaining basic operational safety and prevents the network from ever achieving the safe harbor. 3. Incompatibility of Financial Reporting with Machine Networks The fundraising exemptions (Tiers 1 and 2) mandate narrative disclosures and audited financial statements modeled after traditional corporate architectures. For an open-source, automated drone network run by globally distributed edge nodes, there is no centralized corporate entity capable of generating traditional balance sheets. The data required to prove compliance exists entirely on-chain, via cryptographically auditable telemetry and transaction logs, which the proposed framework does not currently recognize as valid disclosures. Recommendations for Modification Carve out a "Functional Machine Utility" exemption: Explicitly exempt tokens that are strictly utilized for programmatic micro-transactions between autonomous software/hardware agents from the definition of an investment contract. Clarify Rule 400 for Software Patches: Explicitly state that routine software maintenance, open-source code contributions, and safety-critical firmware updates do not constitute "managerial efforts" that invalidate decentralization status. Accept On-Chain Disclosures: Allow distributed technical networks to satisfy transparency requirements by submitting cryptographically verifiable, on-chain state data on Form TR in lieu of traditional corporate financial statements. Autonomous machine networks require a regulatory environment that understands code-driven infrastructure. Imposing a legacy financial framework on physical, automated systems will stifle critical American innovation in both the robotics and software sectors. Thank you for your time and consideration of these technical realities. Sincerely, Kevin Liu Full-Stack Software Engineer, Autonomous Systems Palo Alto, CA