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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 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.
Implements cryptographic content-addressing (SHA-256) and hash-chaining to provide tamper-evident proof of authenticity, supporting Federal Rules of Evidence 901 and 1002 for admissibility.
Establishes structured workflows for court-ordered or regulatory preservation, including dual authorization, enhanced replication (5 nodes across 3 jurisdictions), and air-gapped vault storage to ensure compliance with litigation and enforcement obligations.
Maintains immutable custody event logs for every evidence lifecycle action (creation, replication, access, transfer, disposal), enabling complete audit trails and supporting business records exception under FRE 803(6).
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.
