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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.
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 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.
The SEC cannot extend broker‑dealer, exchange, or adviser jurisdiction to software developers merely because their published code facilitates transactions; publishing software is protected speech unless the developer assumes agency, custody, or client‑specific discretionary control.
Government attempts to require software to incorporate identity collection, monitoring, or intermediation functions constitute compelled speech and unconstitutional prior restraint, because they force creators to alter expressive software design to satisfy government‑preferred architectures.
Regulatory authority may constitutionally reach developers only when they move beyond publication and into professional conduct—such as holding unilateral power over user assets, executing transactions, or exercising ongoing discretionary judgment over users’ financial affairs.
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 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.
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 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.
The submission urges the SEC to distinguish legally between tokenization and canonicalization, arguing that only canonicalized, ledger-native asset objects allow the Commission to examine, audit, and enforce regulatory obligations at the protocol level.
It recommends that Regulation Crypto include architectural requirements for digital-asset securities, potentially through a class definition certification regime that embeds compliance logic in canonical class definitions rather than relying on issuer-by-issuer contract code.
It advises that safe harbors, custody rules, and settlement frameworks must account for ledger architecture, warning that permitting trading on smart contract systems lacking canonical asset identity leaves the SEC unable to enforce against assets the ledger cannot natively identify.
