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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
Paradigm urges the SEC to issue interpretive guidance confirming that tokenized securities retain their status as securities under federal law, ensuring that blockchain-based issuance does not alter legal obligations under the Securities Act or Exchange Act.
The letter recommends that the SEC clarify and potentially revise transfer agent and recordkeeping rules to accommodate blockchain-based systems, including allowing issuers to act as their own transfer agents and recognizing distributed ledgers as official books and records.
Paradigm proposes updates to registration forms (e.g., Form S-1) and ongoing disclosure requirements to reflect the technical specifics of tokenized securities, including smart contract features, custody mechanisms, and onchain governance, while maintaining investor protection standards.
The OTCM Protocol employs a novel “Howey Shield” framework to ensure its tokens do not meet the definition of a security under the Howey Test, emphasizing the absence of profit expectation and managerial reliance, thus classifying tokens as commodities.
The protocol integrates SEC-registered intermediaries (e.g., Empire Stock Transfer) for custody and compliance, aligning with February 2025 SEC guidance on meme tokens and reinforcing investor protection through professional custody and full KYC/AML procedures.
The OTCM model is proposed as a regulatory template for future safe harbor provisions, demonstrating how asset-backed, entertainment-purposed tokens can operate within existing legal frameworks while revitalizing illiquid markets.
Custody, Public Offerings, Security Status, Tokenization
The letter urges the SEC to distinguish between fundraising tokens (which should be regulated as securities) and protocol/utility tokens (which should not), to avoid overregulation of decentralized infrastructure.
It advocates for treating smart contracts as neutral software infrastructure rather than financial instruments, emphasizing their role in automating logic rather than raising capital.
Firepan emphasizes that software providers like itself should not be subject to securities regulation when they do not engage in custody, compliance, or issuance—those roles should remain with licensed financial entities.
The document discusses the significant role of central banks and government policies in financial crises, highlighting the federal bailout of Fannie Mae and Freddie Mac during the 2008-2009 financial crisis.
It emphasizes Bitcoin's aim to establish a decentralized digital currency, independent of traditional financial institutions, through a peer-to-peer network that validates transactions without a trusted third party.
The document addresses the regulatory challenges faced by Bitcoin, including its use in illicit activities and the government's ability to seize and auction Bitcoin, demonstrating that decentralized systems are not immune to regulation.
James Q. Walker, Lowell D. Ness, Arthur S. Greenspan, Valeska Pederson Hintz, Zeeve Rose, Kiran Gill, Perkins Coie LLP
Custody, Public Offerings, Safe Harbor, Security Status, Tokenization, Trading
The SEC’s Division of Corporation Finance concluded that proof-of-work (POW) mining activities do not constitute the offer and sale of securities under federal securities laws.
The proof-of-stake (POS) validation process should not be considered an investment contract security under the Howey test, as rewards are compensation for technical validation services, not profits based on the efforts of others.
The issuance of liquid staking tokens (LSTs) should not be considered the offer or sale of a new security, as they are temporary stand-ins for the original staked crypto assets.
Statter Network will issue its native token, STT, through mining without an ICO. The token will be used for DAO governance, allowing token holders to participate in decision-making processes.
Statter Network employs a cross-chain bridge to facilitate the transfer of tokens, smart contract instructions, and information between different blockchains, ensuring interoperability and value exchange.
Statter Network ensures user privacy and transaction confidentiality through multiple layers of protection, including permission control, access authentication, and encrypted storage. It also uses a Segmented Proof of Work (SPoW) consensus mechanism to balance fairness and low energy consumption.
Custody, Public Offerings, Security Status, Tokenization, Trading
DAOs (Decentralized Autonomous Organizations) can be used to quickly raise funds and maintain local ownership of community businesses.
Current legal frameworks prevent non-accredited investors from participating in private markets, but a mature DAO framework could provide new equity ownership opportunities.
DAOs operate within cryptocurrency frameworks, and stablecoin legislation is actively being developed, which could support the growth and stability of DAOs.
Public Offerings, RFI Responses, Safe Harbor, Security Status, Tokenization, Trading
Proposes a tailored safe harbor under Category 3 of Regulation S for token offerings, addressing challenges like continuous token distributions and flowback restrictions.
Suggests updates to Category 1 of Regulation S to make it workable for FPIs of crypto assets, including adjustments to the "substantial U.S. market interest" test and Exchange Act registration thresholds.
Recommends digital-native compliance methods such as geoblocking, on-chain controls, and electronic purchaser certifications to satisfy Regulation S requirements for crypto assets.
The proposal seeks a safe harbor from broker registration requirements for certain decentralized financial applications (DeFi Apps) and non-fungible token (NFT) marketplaces that do not pose traditional broker-related risks.
It outlines conditions for eligibility, including non-custodial design, lack of discretion in transactions, and prohibition on active solicitation or investment recommendations.
The proposal emphasizes the need for clear regulatory guidelines to foster innovation while protecting investors, aligning with historical practices and recent legislative efforts.
Douro Labs requests SEC guidance clarifying that securities laws do not preclude the use of pricing data from decentralized oracle networks for asset valuation, provided the networks meet quality, transparency, and resiliency standards.
The letter emphasizes that decentralized oracle networks can enhance competition, efficiency, and investor protection in the financial data market by providing comprehensive, trustworthy, and affordable pricing data.
Douro Labs suggests that the SEC issue interdivisional FAQs to define decentralized oracle networks, outline their threshold attributes, and confirm their permissible use for regulatory calculations under existing securities laws.
