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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 submission proposes a Structural Enforcement Standard that embeds legally binding transfer conditions, remedies, revocability, and dispute resolution terms directly into a token’s architecture, ensuring obligations survive every transfer and eliminating reliance on platform-level enforcement.
The model applies traditional trust law architecture—separating authority (trustee) from beneficial rights (beneficiary)—to digital assets through a dual layer token structure that enables automatic, on chain enforcement consistent with established legal doctrine.
The author urges the SEC to grant regulatory clarity and potential safe harbor for tokens adopting this structure, arguing it provides superior investor protection, clearer legal classification, and a scalable foundation for institutional tokenization.
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.
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.
Tokenization cannot rely solely on technical execution; legal legitimacy must be established before issuance. Without a clear, verifiable legal regime and enforceable rights embedded ex ante, automatic execution creates systemic risk.
SEC no-action letters do not constitute approval or doctrinal clarity; they are ad hoc containment tools. Their recurrence reflects the absence of a standardized framework for determining whether a token qualifies as a security or other legal object prior to issuance.
Smart contracts transform norms into automatic execution, eliminating ex post correction margins. This demands rigorous alignment between legal documentation and code, with enforceable restrictions coded and auditable to prevent reliance on narrative-only limitations.
Current wealth-based thresholds under Rule 501 of Regulation D are outdated; Fairmint advocates for knowledge-based and conditional accreditation frameworks to expand investor access.
Proposal for an SEC-administered, easily accessible online exam (“Accreditation Series”) to qualify individuals regardless of wealth or income, aligning with the Equal Opportunity for All Investors Act of 2025.
Suggests embedding accreditation and eligibility checks into programmable securities via smart contracts, enabling pre-trade enforcement and cryptographic auditability for regulatory compliance.
The SEC should use its exemptive authority and staff guidance to enable tokenized securities trading under clear, principles-based conditions while formal rulemaking is developed.
A technology-neutral regulatory approach is essential to avoid rules that become obsolete and to ensure fair competition without favoring specific technologies.
Interim measures like pilot programs and conditional relief are critical to gather data, address investor protection and oversight concerns, and inform comprehensive rulemaking.
OTCM’s ST22 Security Token model fully satisfies SEC Category 1 requirements, including direct issuer board authorization, SEC-registered transfer agent custody, CUSIP assignment, and 1:1 preferred share backing.
The submission advocates targeted regulatory relief and safe harbor provisions for issuer-authorized tokenization models serving abandoned OTC markets, emphasizing qualified custody and verifiable 1:1 backing.
OTCM integrates protective conversion triggers and programmable compliance controls (e.g., circuit breakers, wallet concentration limits) to mitigate counterparty and bankruptcy risks identified by the SEC.
The proposed Digital Markets Restructure Act of 2026 establishes a uniform federal framework for the issuance, trading, custody, and supervision of digital assets, preempting inconsistent state laws and eliminating duplicative registration requirements for entities operating under joint SEC and CFTC oversight.
Regulatory jurisdiction over digital assets is determined by a risk-based classification model: enterprise risk falls under SEC, exposure risk under CFTC, and market risk is subject to joint oversight, with hybrid instruments supervised collaboratively and lead supervisor designation rotating as risk profiles change.
The Act introduces proportionate, technologically adaptive regulation, recognizing that digital assets may modularize economic rights and risks, and mandates that regulatory requirements scale according to residual risk rather than asset form or label, with safe harbor provisions for innovation and privacy-preserving compliance mechanisms.
The SEC’s exemptive authority under Section 36 of the Exchange Act allows exemptions only if “necessary or appropriate in the public interest” and consistent with investor protection, requiring consideration of efficiency, competition, and capital formation.
Exempting DeFi trading venues and order-entry firms from registration could disapply core investor protections (e.g., best execution, trade reporting, financial responsibility), creating a parallel regulatory regime for the same securities.
Granting exemptions based solely on technological differences risks regulatory arbitrage, undermining market integrity and potentially impairing liquidity, transparency, and resiliency across U.S. equity markets.
The SEC should clarify that proprietary trading for one’s own account in tokenized equity markets—without customer solicitation, custody, or agency execution—does not trigger dealer registration under Exchange Act §3(a)(5).
Innovation exemptions must ensure tokenized equity markets can function effectively by allowing liquidity providers to engage in on-chain trading, price discovery, and arbitrage without registration obligations designed for customer-facing intermediaries.
Existing broker-dealer regulations (e.g., Reg NMS, Reg SHO, custody, clearing) require tailored adaptation for smart contract-based settlement; exemptions should provide time for these frameworks to evolve while enabling immediate liquidity provision.
