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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.
The operating model defines “operational finality conditions met” as an evidence-backed, operational state for settlement, but explicitly states this is not a legal conclusion. Legal finality determinations remain with competent legal authorities and applicable law; the model does not claim to determine legal or regulatory status of instruments or arrangements.
Any yield or reward feature associated with a cash-leg instrument (e.g., tokenized deposits, stable-value rails) must be structurally and operationally separated from the settlement rail, with mandatory disclosure and boundary testing. Introduction or modification of such features triggers recertification and regulatory notification, ensuring compliance with supervisory requirements and preventing undisclosed yield commingling.
The model prohibits any single party from unilaterally controlling settlement, finality, or privileged actions (e.g., escrow release, gate activation). All such actions require quorum/dual authorization, immutable audit logging, and post-event review, ensuring robust separation of duties and regulatory accountability across all operational modes.
The operating model defines “operational finality conditions met” as an evidence-backed, operational state for settlement, but explicitly states this is not a legal conclusion. Legal finality determinations remain with competent legal authorities and applicable law; the model does not claim to determine legal or regulatory status of instruments or arrangements.
Any yield or reward feature associated with a cash-leg instrument (e.g., tokenized deposits, stable-value rails) must be structurally and operationally separated from the settlement rail, with mandatory disclosure and boundary testing. Introduction or modification of such features triggers recertification and regulatory notification, ensuring compliance with supervisory requirements and preventing undisclosed yield commingling.
The model prohibits any single party from unilaterally controlling settlement, finality, or privileged actions (e.g., escrow release, gate activation). All such actions require quorum/dual authorization, immutable audit logging, and post-event review, ensuring robust separation of duties and regulatory accountability across all operational modes.
The letter urges the SEC to favor prospective rulemaking over individualized no‑action or exemptive relief, arguing that selective relief fragments the market, creates uneven treatment, and implicitly advantages entities able to petition for relief.
It recommends establishing a formal safe harbor via notice‑and‑comment to accommodate decentralized networks that cannot seek exemptive relief, enabling tokenization on both permissionless and permissioned systems with appropriate investor protections.
The letter argues that tokenized‑security recordkeeping and compliance functions can be embedded directly in blockchain systems, potentially reducing or eliminating mandated transfer agents and other intermediaries, provided issuers retain responsibility and optional delegation rights.
The Pack is strictly non-normative and implementation-agnostic. It does not create new legal obligations, assert legal conclusions, or prescribe regulatory interpretations. All operational guidance is framed as best practice aligned with existing recordkeeping standards and pilot participation requirements.
The framework operationalizes examiner-ready evidence, continuous reconciliation, and offboarding controls for tokenized securities pilots. It provides standardized Ownership Evidence Sets (OES), continuous reconciliation workflows, custody/registry alignment checks, and reversible offboarding proof bundles, all designed to support regulatory examination and reduce supervisory friction.
Upon detection of reconciliation breaks or integrity failures, the Pack mandates immediate “hold-only” containment (freezing affected records), distributed approval for all corrections (no master key or single-actor override), and preservation of all evidence via content-addressed storage and legal hold mechanisms. All actions are logged, versioned, and independently verifiable.
The framework proposes a multi-tiered, zero-knowledge proof (ZKP)-backed privacy model that enables regulatory examiners (e.g., SEC) to verify compliance (eligibility, sanctions screening, concentration limits) without accessing raw personally identifiable information (PII) or sensitive commercial data, thus resolving the tension between regulatory oversight and data confidentiality in tokenized markets.
It establishes a legally significant, tiered disclosure ladder (Tier 0/1/2) for supervisory access, ensuring regulators receive only the minimum necessary data for each gate, with escalation and post-access review requirements for exceptional identity reveals, and mandates that every compliance proof artifact be mapped to a recognized evidence pack (DEP/SEP/VOP) before reliance.
The framework includes technical artifacts and workflows for cross-border evidence portability, applying minimization/redaction templates and conflict-of-laws playbooks to ensure compliance with foreign data protection, secrecy statutes, and data localization rules, and gating cross-border production on active Memorandum of Understanding (MoU) scope confirmation.
SIFMA (Securities Industry and Financial Markets Association)
Wallet providers performing order‑routing, price‑curation, execution‑related functions, or earning transaction‑based compensation may be deemed brokers under the Exchange Act, even without custody of customer assets.
Broker analysis is fact‑specific, requiring a holistic evaluation of wallet‑provider activities; the SEC v. Coinbase ruling does not create a categorical exemption for non‑custodial wallet providers.
Regulatory clarity should ensure “like activities are regulated alike,” preventing regulatory arbitrage and ensuring wallet providers performing securities‑intermediation functions meet broker‑dealer obligations.
The document operationalizes the integration of tokenized U.S. sovereign bills and private credit into programmable infrastructure, establishing mandatory agent accountability envelopes, immutable decision logs, and standardized evidence artifacts to ensure regulatory alignment, eligibility enforcement, and market integrity without introducing new legal obligations or policy positions.
It mandates that all algorithmic agents operate under explicit, examiner-ready mandates with defined risk limits, kill authority, and change control, ensuring that all agentic actions are attributable to a responsible legal entity and are fully auditable for compliance with existing securities laws and supervisory expectations.
The framework requires dual-layer custody controls (on-ledger and off-ledger), continuous reconciliation, and robust asset return protocols, with multi-party approvals and evidence packaging, to prevent commingling, ensure 1:1 asset backing, and enable controlled unwind or asset return in stress or wind-down scenarios.
Both EU and U.S. frameworks converge on the need to define the legal nature of a token before issuance, not after circulation. This includes identifying whether it is a financial instrument under MiFID II, a crypto asset under MiCAR, or subject to U.S. securities law.
The token’s legal identity cannot be inferred from the asset it references. Tokenization may create a new legal object, requiring autonomous analysis of rights, transferability, and executable behavior.
Declared rights and restrictions in issuance documents must align with the smart contract’s executable logic. Divergence between narrative and technical behavior triggers regulatory reclassification and systemic risk.
The framework mandates that all transfer restrictions (e.g., lockups, eligibility gating, jurisdictional limits) must be enforced at the moment of transaction execution, not merely through legal legends or post-settlement audits. This includes dynamic credential verification, sanctions screening, and concentration limit checks, with all failed attempts logged and subject to regulatory review.
All private market tokenized instruments must maintain a standardized disclosure schema (SDS) with ten required modules (structure, rights/restrictions, eligibility, fees, conflicts, valuation, liquidity/exit, governance, risk, communications). Each disclosure claim must be mapped to verifiable evidence artifacts, enabling examiners to validate compliance and investor protection obligations efficiently.
The framework establishes a privacy-graduated, tiered access model for regulators (aggregate, scoped, identity-revealing), with strict purpose limitation and time-to-live (TTL) controls. Automated examiner workflows and query packs are provided to facilitate rapid, evidence-based investigations, including escalation protocols for suspected manipulation, restriction bypass, or governance breaches.
Replace Rule 603’s prescriptive SIP-based consolidated display requirement with a principles-based “Fair Quote Presentation Rule” that focuses on anti-misleading standards, disclosure of data sources, and transparency rather than mandating a single data model.
Explicitly allow alternative, verifiable data sources—including cryptographically verifiable distributed ledger states, venue-native order books, and modern feeds like Pyth—for DeFi platforms, tokenized ATSs, and crypto-native venues under the Commission’s Innovation Exception framework.
Maintain investor protection through disclosure, timestamp integrity, and supervisory controls instead of enforcing reliance on centralized SIP infrastructure, which imposes cost and governance inefficiencies incompatible with modern markets.
