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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.
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.
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.
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.
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.
Regulatory frameworks for tokenized securities must preserve core investor protections—such as best execution, custody safeguards, and conflict-of-interest disclosures—by adapting existing securities laws rather than bypassing them.
Any innovation exemption or regulatory sandbox must include public input, clear disclosure requirements, and structural guardrails (e.g., transaction caps, duration limits, and exit criteria) to prevent regulatory arbitrage and protect market integrity.
Tokenization does not alter the legal nature of an asset; thus, tokenized securities and derivatives must remain subject to existing securities and derivatives laws, with regulatory treatment based on economic substance rather than technological form.
FIA PTG urges the SEC to formally recognize that the Howey test must be applied on a transaction-by-transaction basis, and that most secondary-market crypto transactions do not constitute securities transactions unless under exceptional circumstances.
The group supports a safe harbor framework, as proposed by Commissioner Peirce, to provide legal certainty for crypto projects during their development phase, emphasizing decentralization based on control rather than ownership thresholds.
FIA PTG recommends that tokenized assets and stablecoins be explicitly recognized as eligible collateral under SEC rules, provided appropriate risk management policies are in place.
The SEC should not create a new registration category for platforms trading tokenized securities; instead, it should adapt existing frameworks (e.g., NSE, ATS) to accommodate blockchain-based trading infrastructure.
The SEC should clarify or amend rules to permit side-by-side and pairs trading of securities and non-securities (e.g., stablecoins, bitcoin) on a single platform, treating such transactions as securities trades when appropriate.
A principles-based approach to best execution should be adopted for both offchain and onchain environments, emphasizing transparency, operational integrity, and flexibility in execution standards.
