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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.
Custody, Public Offerings, Safe Harbor, Security Status, Tokenization, Trading
The letter argues that the SEC’s attachment/separation framework for investment contracts applied to non‑security crypto assets is novel, lacks jurisprudential grounding, and cannot feasibly be implemented by third‑party interface providers because issuer‑side facts determining attachment are unknowable by those providers.
It requests a Commission‑level safe harbor exempting self‑custodial, user‑directed interfaces (e.g., MetaMask) from broker‑dealer registration when facilitating secondary transactions in non‑security crypto assets, even if an investment contract may have “attached” under the Release but not yet “separated.”
It contends that without such a safe harbor, U.S. interface providers face unworkable compliance obligations that will constrain token interoperability, distort competition relative to offshore providers, and reduce user protection by pushing activity to unregulated venues.
Custody, Public Offerings, Safe Harbor, Security Status, Tokenization, Trading
The report establishes that routing payment‑stablecoin balances into 1940 Act–registered money market funds is legally outside §404’s prohibition, because NAV‑based MMF shares are securities, not deposit‑equivalents, and §404 governs only yield on payment stablecoins.
It proposes a threshold NAV pass‑through test—requiring user‑borne downside risk, NAV‑tracking pricing, and 1099‑DIV tax treatment—under which any failure creates an irrebuttable presumption of prohibited passive yield.
It provides a six‑factor, on‑chain‑auditable framework for agencies to distinguish bona fide user‑initiated activity from disguised yield, anchoring “routing” within expected rulemaking categories (transfers and market‑making) rather than creating new statutory exceptions.
The petition requests that the SEC establish a recognized regulatory category for “Persistent‑Enforcement Digital Asset Systems,” where conditions governing asset use are automatically and continuously enforced at the asset level, independent of intermediaries.
The proposed framework would allow the SEC to distinguish digital assets that do not rely on ongoing managerial efforts (due to embedded, self‑executing enforcement) from those that do—directly affecting the Howey securities analysis.
The petition asserts that this structure would close material investor‑protection gaps, ensuring that conditions disclosed at issuance remain enforceable throughout the asset’s lifecycle, including across platforms and autonomous/AI‑driven transactions.
Crypto Lending, Custody, Public Offerings, Tokenization, Trading
The SEC should modernize Regulation ATS to explicitly accommodate DeFi based trading and lending protocols, providing durable legal certainty and a compliant pathway for onchain securities activities.
The Commission should issue guidance and exemptive relief under Exchange Act § 17A to allow distributed ledger based clearance and settlement—potentially granting blockchain protocols “clearing corporation” status to remedy UCC Article 8 property rights gaps.
The SEC should clarify offering, custody, and net capital treatment for tokenized securities (including onchain IPOs, broker dealer custody, and Rule 15c3 1 haircuts) to ensure these instruments receive consistent regulatory treatment with their traditional equivalents.
TEFRA’s bearer‑bond rules functionally prohibit tokenized bond issuance on public blockchains by denying issuers interest deductions and imposing excise taxes, creating a statutory barrier that Congress must amend to recognize compliant distributed‑ledger‑based bond registers.
Integration of tokenized securities into federal securities laws requires statutory or regulatory modernization—particularly expanding “broker” definitions, creating tailored DeFi‑broker/ATS frameworks, updating custody and transfer‑agent rules, and enabling onchain IPOs without fragmenting NMS market structure.
A BSA‑aligned compliance regime for tokenized securities—modeled on the GENIUS Act's token‑level monitoring and freeze‑and‑seize capabilities—is necessary to support pseudonymous, non‑custodial secondary trading while preserving investor protection and regulatory oversight.
The response urges the SEC to revise Regulation NMS and Regulation ATS to accommodate blockchain based market structures, recognizing that Crypto ATSs deviate materially from traditional CLOB centered architectures.
It recommends formal withdrawal of the “Three Step Process” and clarifying that Crypto ATSs may engage in clearing and settlement activities, removing unnecessary barriers created under earlier staff interpretations.
It advocates maintaining a clear legal distinction between software development and regulated financial intermediation, ensuring that non custodial, permissionless protocols and code publication alone do not constitute operating a regulated venue.
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.
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.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization, Trading
The SEC should continue developing a clear regulatory framework enabling broker‑dealers to custody, trade, and support crypto asset securities, including on ATSs, to reduce legal uncertainty and enable compliant market participation.
The SEC should issue bright‑line standards for tokenized securities, ensuring ATSs can rely on the regulatory status ascribed to a tokenized instrument—critical for avoiding unintended securities‑based swap or unregistered offering violations.
The SEC should provide regulatory clarity permitting on‑chain recordkeeping and settlement by broker‑dealers without triggering clearing‑agency status, enabling lawful integration of distributed‑ledger processes into securities market infrastructure.
Public Offerings, Security Status, Tokenization, Trading
The letter underscores that applying existing securities-law pathways (Reg A, Reg D, Reg CF, broker dealer requirements, transfer agent rules, and blue sky compliance) to millions of small value real estate tokenizations is economically prohibitive, creating a structural mismatch between current securities regulation and the scale of RWA tokenization.
It raises the question of whether the SEC will consider new, scalable regulatory frameworks tailored to real property tokenization, distinct from those used for institutional grade tokenized assets, to avoid overwhelming regulatory capacity.
It proposes AI assisted disclosure and verification systems as a potential lawful infrastructure for scalable compliance, while acknowledging legal concerns around delegation, data reliability, and alignment with state property law.
