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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.
Public Offerings, Regulatory Sandbox, Security Status
The comment references an Op-Ed intended to inform the SEC’s review process, suggesting reliance on external expert analysis for regulatory considerations.
It emphasizes investor protection in the context of evolving financial markets, aligning with the SEC’s statutory mandate under securities laws.
The submission implicitly advocates for regulatory responsiveness to rapid changes in financial products and practices, which may impact compliance and enforcement frameworks.
Tokenization cannot rely solely on technical execution; legal legitimacy must be established before issuance. Without a clear, verifiable legal regime and enforceable rights embedded ex ante, automatic execution creates systemic risk.
SEC no-action letters do not constitute approval or doctrinal clarity; they are ad hoc containment tools. Their recurrence reflects the absence of a standardized framework for determining whether a token qualifies as a security or other legal object prior to issuance.
Smart contracts transform norms into automatic execution, eliminating ex post correction margins. This demands rigorous alignment between legal documentation and code, with enforceable restrictions coded and auditable to prevent reliance on narrative-only limitations.
Current wealth-based thresholds under Rule 501 of Regulation D are outdated; Fairmint advocates for knowledge-based and conditional accreditation frameworks to expand investor access.
Proposal for an SEC-administered, easily accessible online exam (“Accreditation Series”) to qualify individuals regardless of wealth or income, aligning with the Equal Opportunity for All Investors Act of 2025.
Suggests embedding accreditation and eligibility checks into programmable securities via smart contracts, enabling pre-trade enforcement and cryptographic auditability for regulatory compliance.
The SEC should use its exemptive authority and staff guidance to enable tokenized securities trading under clear, principles-based conditions while formal rulemaking is developed.
A technology-neutral regulatory approach is essential to avoid rules that become obsolete and to ensure fair competition without favoring specific technologies.
Interim measures like pilot programs and conditional relief are critical to gather data, address investor protection and oversight concerns, and inform comprehensive rulemaking.
OTCM’s ST22 Security Token model fully satisfies SEC Category 1 requirements, including direct issuer board authorization, SEC-registered transfer agent custody, CUSIP assignment, and 1:1 preferred share backing.
The submission advocates targeted regulatory relief and safe harbor provisions for issuer-authorized tokenization models serving abandoned OTC markets, emphasizing qualified custody and verifiable 1:1 backing.
OTCM integrates protective conversion triggers and programmable compliance controls (e.g., circuit breakers, wallet concentration limits) to mitigate counterparty and bankruptcy risks identified by the SEC.
The framework mandates a machine-readable Standardized Disclosure Schema (SDS) for tokenized real-asset securities, requiring issuers to provide verifiable, version-controlled disclosures, each field of which must be backed by specific evidence artifacts (Disclosure Evidence Pack, or DEP). This transforms vague disclosure obligations into auditable, regulator-ready data, reducing legal ambiguity and examination friction under U.S. securities laws.
The Exit & Liquidity Annex (ELA) establishes legally binding protocols for investor exit, secondary market transfer, liquidity stress modes, and offboarding to legacy systems. It requires explicit disclosure of liquidity modes (normal, limited, stress, offboarding), transfer restrictions, redemption rights (if any), and failure remediation, ensuring investors are never permanently locked in and that all exit mechanisms are transparent and enforceable.
The standard introduces a three-lane attestation model: (1) issuer self-certification, (2) service provider verification, and (3) independent assessor certification, with increasing levels of independence and legal assurance. Critical disclosures (e.g., valuation, financials) require independent third-party attestation for pilot eligibility, and all evidence must be digitally signed, checksummed, and retained per SEC recordkeeping requirements.
The proposed Digital Markets Restructure Act of 2026 establishes a uniform federal framework for the issuance, trading, custody, and supervision of digital assets, preempting inconsistent state laws and eliminating duplicative registration requirements for entities operating under joint SEC and CFTC oversight.
Regulatory jurisdiction over digital assets is determined by a risk-based classification model: enterprise risk falls under SEC, exposure risk under CFTC, and market risk is subject to joint oversight, with hybrid instruments supervised collaboratively and lead supervisor designation rotating as risk profiles change.
The Act introduces proportionate, technologically adaptive regulation, recognizing that digital assets may modularize economic rights and risks, and mandates that regulatory requirements scale according to residual risk rather than asset form or label, with safe harbor provisions for innovation and privacy-preserving compliance mechanisms.
The Kit does not create new regulatory requirements or legal mandates; it operationalizes existing market integrity expectations (such as those under Rule 15c3-5 and Rule 17a-4) for tokenized markets, providing standardized surveillance evidence and workflows that align with current statutory and regulatory frameworks.
Surveillance operates under a strict tiered access model (Tier 0/1/2), ensuring that participant identities remain pseudonymous unless objective manipulation indicators are met and dual legal/compliance approval is obtained, in line with Regulation S-P and due process standards.
The Kit mandates cryptographic hash chaining, digital signatures, and tamper-evident storage for all surveillance evidence, ensuring admissibility and integrity for enforcement actions, and aligning with SEC books and records retention requirements.
The SEC’s exemptive authority under Section 36 of the Exchange Act allows exemptions only if “necessary or appropriate in the public interest” and consistent with investor protection, requiring consideration of efficiency, competition, and capital formation.
Exempting DeFi trading venues and order-entry firms from registration could disapply core investor protections (e.g., best execution, trade reporting, financial responsibility), creating a parallel regulatory regime for the same securities.
Granting exemptions based solely on technological differences risks regulatory arbitrage, undermining market integrity and potentially impairing liquidity, transparency, and resiliency across U.S. equity markets.
The framework explicitly rejects global harmonization and ensures that domestic laws and supervisory authority remain primary, with bilateral MoUs defining coordination procedures without transferring decision-making authority.
Cross-border evidence portability operates under a strict “no raw PII export by default” principle, relying on attestations, pseudonymization, and purpose-limited extracts, with exceptions only under Tier 2 emergency protocols and documented legal authority.
Seven operational playbooks address legal tensions such as retention vs. deletion mandates, data localization restrictions, secrecy obligations, and privilege assertions, providing structured escalation paths and bilateral governance for resolution.
