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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 SEC should adopt a technology-neutral approach to regulating crypto assets, extending existing staff positions, no-action relief, and interpretative guidance applicable to non-tokenized funds to tokenized funds as well.
The SEC should clarify and update regulations regarding the custody of crypto assets, including eligibility of custodians and self-custody arrangements under Section 17(f) of the Investment Company Act of 1940.
Any new regulations should be principles-based, not prescriptive, and should avoid imposing unnecessary compliance burdens, especially on smaller entities and market entrants.
Diamante proposes a quantum-resilient blockchain infrastructure that supports post-quantum cryptographic integrity and verifiable tokenization of environmental assets, aligning with SEC sustainability and digital asset frameworks.
The system enables transparent, auditable ESG disclosures through immutable transaction history, facilitating compliance with SEC reporting and disclosure requirements for digital assets.
Diamante’s framework demonstrates how tokenized sustainability markets can operate within evolving U.S. securities laws, supporting innovation while maintaining regulatory guardrails and market integrity.
The document recommends that custody of digital assets in decentralized markets should be regulated differently from traditional markets, emphasizing technology-neutral standards, robust cryptographic key management, and operational resilience, with tailored requirements for multi-signature, MPC custody, and self-custody arrangements.
The framework treats tokenization as an operational change, not a change in legal categorization, and urges regulators to adapt existing risk categories for tokenized securities, focusing on transparency, operational integrity, and dispute resolution regardless of ledger type.
Regulations should permit temporary commingling of customer assets for operational reasons (e.g., settlement, forks), but require prompt disaggregation, robust internal controls, audit trails, and prohibit rehypothecation except with explicit customer consent.
Securitize’s issuer-sponsored tokenization model ensures that tokenized public equities are issued directly by the issuer, conferring the same legal rights (voting, dividends, corporate actions) as traditional securities, with all investors KYC-verified and transfers governed by smart contracts for compliance.
Wrapped token and derivative models introduce additional counterparty risk, lack equivalent ownership rights, and often fail to meet KYC/AML and transfer restriction requirements, raising significant regulatory concerns and potential for non-compliance with U.S. securities laws.
Securitize’s model operates fully within existing securities regulations and does not seek exemptions, contrasting with other models that may rely on regulatory arbitrage or require exemptive relief, and advocates for modernization of certain rules to accommodate blockchain solutions.
Bank Policy Institute, Association of Global Custodians, and Financial Services Forum
The SEC should not expand the definition of “qualified custodian” to include entities like state-chartered trust companies unless they are subject to regulatory oversight and prudential standards equivalent to those applied to banks.
Investment advisers should not be permitted to self-custody client crypto assets without full compliance with the Investment Advisers Act and related custody rules, as this would expose investors to heightened risks and conflicts of interest.
Any changes to the custody framework for crypto assets must maintain the core principles of asset segregation, separation of functions, and proper control to ensure investor protection and market stability.
Lisa Crossley, National Society of Compliance Professionals
NSCP urges the SEC to provide clear, objective criteria for determining whether a digital asset is a security or commodity, warning that current reliance on subjective “facts and circumstances” tests places undue interpretive burdens on compliance officers.
NSCP requests detailed guidance on how SEC-registered investment advisers can comply with Custody Rule 206(4)-2 when using digital asset custodians, particularly regarding the use of omnibus accounts, self-custody, and multi-party computation (MPC) key management.
NSCP emphasizes the need for coordinated rulemaking between the SEC, CFTC, and other regulators to avoid duplicative or conflicting compliance obligations, especially as Congress considers legislation that may assign overlapping jurisdiction.
Wintermute urges the SEC to affirm that broker-dealers may trade tokenized securities for their own account, self-clear and settle such trades, and custody proprietary positions using wallet software, without triggering customer protection rules.
The SEC should clarify that providing liquidity or trading tokenized securities on DeFi protocols—whether by U.S. or non-U.S. participants—does not, by itself, require broker-dealer registration or trigger U.S. jurisdiction, absent targeted solicitation.
The SEC should confirm that network tokens (e.g., Bitcoin, Ethereum), which are essential to decentralized protocols, are not securities under the Howey Test, even if initially distributed in fundraising transactions or traded speculatively.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization
Cryptocurrencies, despite lacking traditional security characteristics, should be subject to disclosure and protection standards akin to those under the Securities Act of 1933 and the Investment Company Act of 1940 due to their accessibility to unsophisticated investors.
The absence of intrinsic value, backing, or cash flow in cryptocurrencies makes them particularly risky and difficult to value using conventional corporate finance methods, necessitating enhanced regulatory scrutiny.
The SEC is urged to initiate a formal notice-and-comment rulemaking process to ensure inclusive public participation and to establish clear regulatory frameworks that promote responsible innovation and market integrity.
Lilya Tessler and Kate Lashley, Sidley Austin LLP on behalf of Ava Labs, Inc. and Owl Explains
Ava Labs proposes a new regulatory category—“Protocol Tokens”—defined as intangible, commercially fungible assets integral to the functioning of a protocol. These tokens should not be classified as securities, regardless of whether they are in a pre-functionality or functional state.
The SEC should adopt a rulemaking framework that presumes offers and sales of Pre-Functionality Protocol Tokens are investment contracts, but allows for rebuttal and provides a new exemption (“Regulation PT”) with tailored disclosure, AML/KYC, and filing requirements.
SEC-registered intermediaries (e.g., broker-dealers, ATSs, NSEs) should be permitted to support Protocol Token activities under existing frameworks, with targeted amendments and interpretive guidance. A transitional grace period should allow such activities pending final rulemaking.
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.
