Crypto Task Force Written Input

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.

Date Written Input Topic(s) Key Points
KPMG LLP

RE: Request for response to Crypto Task Force questions 		Custody, Security Status, Tokenization, Trading
  • The document emphasizes the need for clarity in market structure, registration, exchanges, and custody to strengthen the foundation for engaging in the crypto industry.
  • It highlights the importance of principles-based guidance and the role of independent standard-setters like FASB, PCAOB, and AICPA in developing and amending crypto asset accounting and auditing standards.
  • The document discusses the unique auditing challenges presented by crypto assets and the need for clear guidance on what constitutes reliable audit evidence, particularly from decentralized blockchains.
James Walker, Lowell Ness, Arthur Greenspan, Valeska Pederson Hintz, Zeeve Rose, Perkins Coie LLP

Recommendations to the Crypto Task Force to Propose a Framework and Address “Security Status” and “Scoping Out” 		Security Status, Tokenization, Trading
  • The document proposes a framework for distinguishing securities transactions from non-securities transactions, emphasizing the importance of analyzing the facts and circumstances of each transaction separately rather than in the aggregate.
  • It suggests that crypto assets should be treated as commodities unless they provide holders with rights to a share of profits or a return on investment, in which case they should be considered securities.
  • The document recommends that certain crypto assets, such as payment stablecoins and meme coins, should not be treated as securities if they are offered and sold in a manner consistent with specific guidelines.
Lilya Tessler, Sidley Austin LLP on behalf of Ava Labs, Inc. and Owl Explains

RE: Asset-Based Classification; Decentralization; Regulatory Status of Technology Functions; Treatment of Infrastructure Providers 		RFI Responses, Safe Harbor, Security Status, Tokenization
  • The document proposes a high-level framework for token classification based on the nature of the asset, advocating for an asset-based approach to evaluating tokens under federal securities laws.
  • It explains why technology functions inherent to the operation of blockchains do not constitute or result in securities and why infrastructure providers on blockchain networks are not securities intermediaries.
  • The submission discusses the importance of regulatory clarity and consistency across different technologies and regulatory agencies, emphasizing that the nature of the asset should determine its legal and regulatory treatment.
     
Steven Sprague, Rivetz Corp. and Rivetz Intl.

Response 		Security Status, Tokenization, Trading
  • The court determined that the promotion of a token's functional value, not just financial value, can classify it as an investment contract.
  • The court highlighted that contracts are of no value if there is any promotion, regardless of the company's involvement in secondary trading.
  • The Rivetz decision implies that almost any utility token or emerging product offering can be considered an investment contract.
Crowdfunding Professional Association (CfPA)

Re: Crowdfunding for Collectible Tokens (NFTs) 		Public Offerings, Safe Harbor, Security Status, Trading
  • The CfPA opposes creating a separate securities compliance framework for NFTs, advocating instead for the use of existing frameworks like Regulation Crowdfunding (Reg CF) and Regulation A.
  • The CfPA proposes a tailored "Form C-NFT" for NFT-based offerings, which would include specific disclosures and eliminate the requirement for GAAP financials in early-stage campaigns.
  • The CfPA emphasizes the need to maintain anti-fraud and ongoing disclosure protections to prevent deceptive marketing and ensure investor protection.
StartEngine

Recommendations from StartEngine on Regulatory Reforms to Support the Tokenization of Securities 		Custody, Public Offerings, Tokenization, Trading
  • Raise the Reg CF cap from $5 million to $50 million and the Reg A limit from $75 million to $250 million.
  • Permit the issuance and trading of tokenized securities under Reg CF, Reg A, and Reg D.
  • Waive Blue Sky compliance for all secondary transactions conducted on SEC-registered ATSs.
Cardano Foundation

Re: Comments on Commissioner Hester M. Peirce’s Statement / Crypto Task Force Questionnaire 		Custody, Public Offerings, Safe Harbor, Security Status, Tokenization
  • The Cardano Foundation advocates for a functional and risk-based taxonomy for blockchain assets, arguing against using decentralization as a criterion for determining whether a blockchain asset is a security.
  • The Foundation emphasizes the importance of regulatory interoperability, suggesting that the SEC align U.S. frameworks with international standards like MiCAR.
  • The Foundation proposes a technology-neutral approach to tokenization, highlighting its potential to enhance market efficiency and transparency.
Alluvial Finance, Inc.

Empowering Global Participation in Securing the Decentralized Internet 		Crypto ETPs, Crypto Lending, Safe Harbor, Security Status, Trading
  • Institutional staking participants should manage and disclose risks from validator concentration and lock-up periods.
  • Clear guidance that Liquid Staking Tokens (LSTs) are not securities will unlock U.S. innovation and adoption.
  • Adaptable regulatory guidance will support competition, innovation, and resilient staking solutions.
AICPA

RE: Request for Comment on There Must Be Some Way Out of Here 		Crypto Lending, Custody, Regulatory Sandbox, Security Status, Tokenization, Trading
  • The AICPA emphasizes the need for clear accounting and auditing guidance for digital assets, highlighting the importance of collaboration with FASB to establish standards.
  • The AICPA's Auditing Subgroup is focused on developing guidance for auditors of entities that hold or transact in digital assets, with specific attention to client acceptance, risk assessment, and valuation.
  • The Attestation Subgroup is working on criteria for stablecoin reporting and controls, aiming to enhance transparency and build trust among stakeholders.
Amar Purushotham Bhat

SUBJECT: - Laws/Rules for preventing fraud by Centralized Exchange acting as Crypto Custodian 		Custody, Security Status
  • Wazirx, a centralized cryptocurrency exchange, was hacked, resulting in the theft of $234 million worth of ETH and ERC20 tokens.
  • Wazirx's claim of fungibility across different blockchains to justify withholding unaffected non-Ethereum crypto assets is misleading and false.
  • Request for the US SEC to formulate laws to prevent misuse of users' crypto assets by centralized exchanges acting as custodians.