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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.
SEC should not require issuer consent for third‑party tokenization because existing securities law frameworks already allow secondary‑market infrastructure to develop without issuer approval, and imposing such a requirement would create an unjustified barrier to lawful market activity.
Conditioning tokenization on issuer consent would distort competition by granting incumbents an effective veto over settlement infrastructure, contrary to principles of technology‑neutral regulation and the SEC’s historical approach to secondary‑market operations.
A time‑ and volume‑limited innovation exemption would allow the SEC to evaluate tokenized securities in real‑world conditions while avoiding overbroad regulatory changes and ensuring consistent, principles‑based treatment across tokenization models.
SEC should not require issuer consent for third‑party tokenization because existing securities law frameworks already allow secondary‑market infrastructure to develop without issuer approval, and imposing such a requirement would create an unjustified barrier to lawful market activity.
Conditioning tokenization on issuer consent would distort competition by granting incumbents an effective veto over settlement infrastructure, contrary to principles of technology‑neutral regulation and the SEC’s historical approach to secondary‑market operations.
A time‑ and volume‑limited innovation exemption would allow the SEC to evaluate tokenized securities in real‑world conditions while avoiding overbroad regulatory changes and ensuring consistent, principles‑based treatment across tokenization models.
The request seeks assurance that no enforcement action will be recommended if a broker‑dealer and transfer agent use a public blockchain (Ethereum Mainnet) solely as a recordkeeping mechanism for tokenized security entitlements, while maintaining Alpaca’s off‑chain books and records as the official ledger.
The proposal preserves the existing Article 8 and DTC indirect holding system, ensuring that all fully‑paid and excess‑margin securities remain at a “good control” location and that tokenized entitlements do not alter the legal character of the underlying securities or OGM products.
The model incorporates established broker‑dealer and transfer‑agent supervisory frameworks, asserting compliance with Exchange Act Rules 17a‑3, 17a‑4, and 15c3‑3, and limiting blockchain use to controlled reconciliation, collateral monitoring, and operational efficiency functions.
The Safe Harbor Proposal establishes a rebuttable presumption of non–broker dealer status for strictly non custodial, non discretionary DeFi front end applications that do not solicit transactions and only interface with decentralized protocols.
The Proposal asserts that such apps do not create the agency risks (custody, discretionary execution, conflicts of interest, solicitation) that the Exchange Act’s broker dealer regime is designed to mitigate, thereby rendering full registration economically inefficient and legally misaligned.
The framework preserves SEC enforcement authority by allowing intervention when an app is DeFi In Name Only (DINO) and functions as a de facto centralized intermediary, ensuring investor protection principles remain intact.
The submission argues that DeFi protocol developers, validators, front end interfaces, liquidity providers, and other non custodial technology participants do not satisfy statutory definitions of “exchange,” “broker,” or “dealer” because they neither exercise discretion, custody assets, nor intermediate transactions.
The letter asserts that the SEC possesses clear authority under Section 36 to provide targeted exemptive relief for tokenized equity trading, consistent with longstanding incremental regulatory practice such as no action relief and conditional exemptions leading up to Regulation AB and Regulation ATS.
The analysis contends that Citadel’s expansive reading of securities intermediary obligations lacks statutory support and would improperly extend regulation to neutral technology providers, contradicting case law including SEC v. Coinbase and Risley v. Uniswap.
The broker‑dealer’s use of Dinari’s blockchain system is permissible only if the off‑chain books and records remain the authoritative records fully compliant with Exchange Act Rules 17a‑3 and 17a‑4, with on‑chain tokens serving strictly as secondary, non‑economic representations.
The blockchain‑based tokens must be entirely duplicative, non‑transferable, and without independent economic or governance rights to ensure they do not alter customer ownership rights or create a separate asset class.
Broker‑dealers must maintain policies and supervisory procedures ensuring continuous alignment between on‑chain and off‑chain records, including reconciliation and exception reporting to prevent false or misleading customer information.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization, Trading
SEC Release No. 33‑11412 establishes the binding five‑category digital‑asset taxonomy and confirms OTCM’s ST22 instruments as Category 1 Model B Digital Securities, with the DLT ledger serving as the authoritative shareholder record
OTCM’s migration from Preferred Series “M” shares to Common Class B Shares ensures full shareholder rights (voting, dividends, liquidation) and directly satisfies Model B’s requirement that tokenized securities represent true equity ownership.
Empire Stock Transfer is formalized as the sole qualified custodian and onboarding authority, centralizing KYC/KYB/AML/OFAC compliance and custody under SEC‑regulated oversight for all ST22 issuers.
The letter argues that existing exchange and ATS regulations cannot be automatically applied to disintermediated protocols because these systems lack core intermediary functions such as custody, order‑book operation, discretion, or agency on behalf of users.
It urges the Commission to distinguish between true intermediaries and neutral software or protocol developers, emphasizing that misclassification would impose technologically impossible obligations and effectively prohibit DeFi activity in the U.S.
The submission advocates for a function‑based, technology‑neutral regulatory framework—mirroring the Commission’s historic approach to emerging technologies—that maintains investor protection without forcing decentralized systems into legacy market‑structure models.
The letter urges the SEC to adopt a functional test for “facility” under the Exchange Act so that only technologies actually performing exchange functions fall within regulatory scope, thereby preventing overreach to DeFi software, AMMs, smart contracts, or developers.
It argues that “group of persons” should not be interpreted broadly; developers or entities lacking unified intent or control over exchange functions should not be regulated as an exchange merely because their software is used by one.
The letter maintains that DeFi technologies providing liquidity or autonomous functionality (e.g., AMMs, self-custodial tools) perform non‑exchange functions and therefore cannot be treated as exchange facilities or components of an exchange.
Custody, Public Offerings, Regulatory Sandbox, Security Status, Tokenization, Trading
Requiring issuer consent for third‑party tokenization would contradict longstanding federal securities law principles, including Section 4(a)(1), Rule 17Ad‑20, and decades of SEC precedent that prohibit issuer-imposed restrictions on secondary‑market portability.
Third‑party tokenization does not create a new security and preserves full shareholder rights; therefore, conditioning tokenization on issuer consent would improperly grant issuers veto authority over lawful secondary‑market transfers.
Recent SEC actions—such as Nasdaq’s tokenized trading approval and the DTCC Tokenization Services pilot—explicitly operated without issuer‑consent requirements, making any new consent mandate a reversal of established regulatory logic and potentially anticompetitive.
