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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.
Crypto ETPs, Custody, Public Offerings, Security Status, Tokenization, Trading
This paper, "Crypto Regulation in the Time of Trump", examines the regulatory environment for cryptocurrencies in the United States, particularly in the context of the Trump administration's policies and actions.
The paper seeks to analyze the impact of the Trump administration's deregulatory approach on the crypto industry, including the potential risks and benefits of reduced oversight and the role of key regulatory bodies such as the SEC.
The paper aims to provide a comprehensive understanding of the current state of crypto regulation in the US, highlighting key issues such as the classification of cryptocurrencies as securities, the role of regulatory sandboxes, and the need for clear guidance on tokenization and trading, with the goal of informing policymakers and regulators as they navigate the complex and rapidly evolving landscape of crypto regulation.
Clarify that decentralized finance protocols do not constitute "exchanges" or "broker-dealers" under the Exchange Act if there is no meaningful human intermediation or custodial control.
Establish a safe harbor framework for DeFi trading and lending protocols that are progressing toward decentralization, modeled on Commissioner Peirce’s proposed Rule 195.
Exclude neutral frontend interfaces from broker-dealer rules if they merely facilitate user access to DeFi protocols without exerting control over user assets or transaction execution.
The letter urges the SEC to recognize convertible digital instruments, such as SAFTs and token warrants, as "qualifying investments" under Rule 203(l)-1 of the Investment Advisers Act of 1940, arguing that these instruments are functionally and economically similar to traditional venture investments.
It highlights the operational and compliance burdens created by the current regulatory definitions, which exclude these digital asset structures, thereby hindering capital formation and innovation within the blockchain sector.
The letter proposes that regulatory clarity on the treatment of these digital assets would enhance U.S. competitiveness, bring more activity onshore, and prevent the exodus of innovation.
Suggests a distributed technical certification authority to validate smart contracts handling significant financial values, including analysis of hidden logical gates, failure predictability, manipulation traces, and compliance with cryptographic standards.
Recommends new regulatory criteria for entities moving digital value, ensuring non-imposing harmonization with global regulatory blocs to maintain effectiveness without stifling innovation.
The framework provides a falsifiable method for system assessment, enabling empirical validation of compliance architectures and evidence-based policy development.
It bridges innovation and compliance by demonstrating how decentralized systems can achieve regulatory objectives through architectural design, reducing systemic risk and enhancing transparency.
The framework supports practical implementation through modular governance models, adaptable systems, and standardized evaluation for regulatory oversight.
Custody, Public Offerings, Security Status, Tokenization, Trading
The paper introduces a normative theory centered on five interdependent principles: enforcement, trust, duty segregation, governance, and adaptability, which are collectively necessary to uphold investor protection, maintain efficient and orderly markets, and ensure transparent capital formation.
It emphasizes the importance of atomic on-chain rule enforcement, where all compliance rules are enforced within each transaction context to prevent execution-path-dependent violations and regulatory arbitrage.
The paper highlights the need for on-chain segregation of duties, ensuring that roles such as protocol developers, auditors, and compliance functions have distinct, verifiable identities to prevent governance failures and maintain system-wide accountability.
The letter requests the SEC to issue interpretive guidance or no-action letters for tokenized insurance-backed bonds to provide legal clarity and support innovation.
It proposes the creation of a regulatory sandbox or pilot program for developing and testing tokenized insurance products in a controlled environment.
The letter recommends updating the SEC's "Framework for 'Investment Contract' Analysis of Digital Assets" to explicitly address tokenized real-world assets like insurance products.
Arca proposes an adjusted market cap standard to address the incorrect calculation of market cap by other services.
The document emphasizes the need for a more effective methodology to account for the number of tokens actually issued, outstanding, and held back by the Treasury.
Arca introduces the term "Adjusted Market Cap" to provide a more accurate representation of a token's market value, considering factors like issued tokens, locked tokens, and tokens held by private investors.
