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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 Coalition supports the SEC Staff’s clarification that non‑custodial user interfaces that merely convert user‑initiated instructions into blockchain‑legible commands do not constitute broker‑dealer activity, as they neither intermediate transactions nor take possession of customer assets.
The Coalition urges the SEC to undertake formal notice‑and‑comment rulemaking to establish a durable, principles‑based definition of “broker” aligned with evolving blockchain technologies, thereby preventing future expansive interpretations that could chill innovation.
The Coalition recommends extending regulatory clarity beyond user interfaces to other neutral infrastructure providers (e.g., validators, RPC/API providers, oracles, cloud services) to ensure they are not inappropriately categorized as broker‑dealers despite not performing brokerage functions.
Facility status for a crypto ATS should apply only when the ATS functionally substitutes for, or extends, an exchange’s core market operations, not when the ATS merely shares enterprise infrastructure or ownership.
NMS plans and Form ATS requirements should be modernized—rather than replaced—to address 24/7 trading, crypto-specific reference data, and on‑chain settlement, maintaining regulatory equivalence between traditional and crypto markets.
Crypto ATS oversight should continue using the confidential, non‑approval Form ATS framework, complemented by targeted public disclosures and potential on‑chain alternatives to Form ATS‑R where transparency is inherently superior.
The Digital Chamber (TDC) urges the SEC to modernize Regulation ATS Rule 302, noting that certain record keeping requirements (including time sequenced order records and USD denominated trading summaries) may be impracticable or distortive for on chain matching engines and trading pairs that do not involve U.S. dollar valuation.
TDC recommends that the SEC evaluate whether on chain settlement flows risk exposing confidential subscriber trading information, and consider permitting or encouraging measures that allow ATS subscribers to mask wallet level activity to protect trading strategies.
TDC advises the SEC to reassess the application of Rule 15c3 5 to crypto ATSs, clarifying that traditional pre trade risk controls may be unnecessary or duplicative where atomic settlement inherently prevents certain risks (e.g., duplicative trades) while still requiring controls to address order entry errors and appropriately calibrated credit limits.
The Commission should issue Commission‑level guidance—rather than rely on staff FAQs—to clarify how ATSs trading crypto asset securities can meet existing disclosure, order display, execution access, custody, reporting, and SCI obligations without revealing exploitable technical details, while maintaining comparability across venues.
Applying existing ATS and NMS frameworks to tokenized NMS stocks requires targeted clarification on USD‑conversion governance, staleness controls, equivalent access, integration into consolidated market data, and functional boundaries between brokerage activity, clearing agency activity, and DLT‑based settlement.
Regulation SCI should continue to apply based on technology‑neutral principles, focusing on systems the ATS operates or controls, while providing guidance on how DLT components, external blockchain dependencies, and validator‑control scenarios affect SCI scope, incident monitoring, and resilience expectations.
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.
The comment argues that cryptographic non‑custody (via 2PC‑MPC) creates a legally distinct category under securities law because it makes unilateral asset control mathematically impossible, materially strengthening the non-broker and non-custodial analysis.
It asserts that smart-contract‑bound compliance—which prevents non‑compliant transactions at the signing layer—should be recognized as equivalent to, or stronger than, organizational controls, supporting outcome‑based rather than structure‑based regulation.
It maintains that Threshold‑FHE enables compliant market transparency by allowing targeted regulatory disclosure and aggregate reporting without exposing individual transaction data, satisfying regulatory objectives while preserving execution privacy.
AMMs that meet defined criteria (no discretionary control, full transparency, deterministic settlement, non‑discriminatory access) are not “exchanges” under the Exchange Act because they lack an organization or group of persons operating or maintaining a marketplace, and do not perform functions traditionally associated with stock exchanges.
Liquidity Providers on such AMMs are not “dealers” under the statutory dealer–trader distinction, as they trade solely for their own accounts, have no customers, and do not solicit orders or provide two‑sided quotes, making dealer registration requirements inapplicable.
The SEC could lawfully permit tokenized‑securities trading on AMMs by adopting a conditional innovation exemption, including whitelisting, volume caps, and required disclosures, to ensure market integrity while enabling compliant tokenization architectures.
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 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.
