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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 request seeks assurance that no enforcement action will be recommended if a broker‑dealer and transfer agent use a public blockchain (Ethereum Mainnet) solely as a recordkeeping mechanism for tokenized security entitlements, while maintaining Alpaca’s off‑chain books and records as the official ledger.
The proposal preserves the existing Article 8 and DTC indirect holding system, ensuring that all fully‑paid and excess‑margin securities remain at a “good control” location and that tokenized entitlements do not alter the legal character of the underlying securities or OGM products.
The model incorporates established broker‑dealer and transfer‑agent supervisory frameworks, asserting compliance with Exchange Act Rules 17a‑3, 17a‑4, and 15c3‑3, and limiting blockchain use to controlled reconciliation, collateral monitoring, and operational efficiency functions.
The Safe Harbor Proposal establishes a rebuttable presumption of non–broker dealer status for strictly non custodial, non discretionary DeFi front end applications that do not solicit transactions and only interface with decentralized protocols.
The Proposal asserts that such apps do not create the agency risks (custody, discretionary execution, conflicts of interest, solicitation) that the Exchange Act’s broker dealer regime is designed to mitigate, thereby rendering full registration economically inefficient and legally misaligned.
The framework preserves SEC enforcement authority by allowing intervention when an app is DeFi In Name Only (DINO) and functions as a de facto centralized intermediary, ensuring investor protection principles remain intact.
The submission argues that DeFi protocol developers, validators, front end interfaces, liquidity providers, and other non custodial technology participants do not satisfy statutory definitions of “exchange,” “broker,” or “dealer” because they neither exercise discretion, custody assets, nor intermediate transactions.
The letter asserts that the SEC possesses clear authority under Section 36 to provide targeted exemptive relief for tokenized equity trading, consistent with longstanding incremental regulatory practice such as no action relief and conditional exemptions leading up to Regulation AB and Regulation ATS.
The analysis contends that Citadel’s expansive reading of securities intermediary obligations lacks statutory support and would improperly extend regulation to neutral technology providers, contradicting case law including SEC v. Coinbase and Risley v. Uniswap.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization, Trading
SEC Release No. 33‑11412 establishes the binding five‑category digital‑asset taxonomy and confirms OTCM’s ST22 instruments as Category 1 Model B Digital Securities, with the DLT ledger serving as the authoritative shareholder record
OTCM’s migration from Preferred Series “M” shares to Common Class B Shares ensures full shareholder rights (voting, dividends, liquidation) and directly satisfies Model B’s requirement that tokenized securities represent true equity ownership.
Empire Stock Transfer is formalized as the sole qualified custodian and onboarding authority, centralizing KYC/KYB/AML/OFAC compliance and custody under SEC‑regulated oversight for all ST22 issuers.
Custody, Public Offerings, Regulatory Sandbox, Security Status, Tokenization, Trading
Requiring issuer consent for third‑party tokenization would contradict longstanding federal securities law principles, including Section 4(a)(1), Rule 17Ad‑20, and decades of SEC precedent that prohibit issuer-imposed restrictions on secondary‑market portability.
Third‑party tokenization does not create a new security and preserves full shareholder rights; therefore, conditioning tokenization on issuer consent would improperly grant issuers veto authority over lawful secondary‑market transfers.
Recent SEC actions—such as Nasdaq’s tokenized trading approval and the DTCC Tokenization Services pilot—explicitly operated without issuer‑consent requirements, making any new consent mandate a reversal of established regulatory logic and potentially anticompetitive.
SIFMA (Securities Industry and Financial Markets Association)
AMM‑based trading of tokenized securities must be regulated based on function, not technology, ensuring that entities performing exchange, ATS, broker, or dealer roles—such as protocol deployers, governance bodies, significant liquidity providers, and front‑ends—are subject to corresponding federal securities law obligations.
AMMs introduce structural investor‑protection and market‑integrity risks (MEV/front‑running, slippage, oracle failures, pseudonymous trading, lack of surveillance, limited dispute resolution, liquidity fragmentation) that must be mitigated through mandatory controls, disclosures, AML/KYC application, and integration with existing market‑structure requirements.
To support compliant securities trading, AMM venues must incorporate price discovery, reporting, systems integrity, and operational resilience comparable to Regulation NMS and Regulation SCI, including reliable market data, transparent execution, and accountable entities capable of maintaining and upgrading smart‑contract trading systems
Digital‑asset documentation is often fragmented across exchanges, wallets, tax reports, platform statements, and user‑generated materials, creating evidentiary uncertainty in legal, fiduciary, and insurance contexts.
Because regulatory treatment may hinge on issuer representations, managerial efforts, and disclosures—not merely asset characteristics—the reliability and completeness of record sets materially affect legal determinations.
The absence of a neutral infrastructure for assessing completeness, consistency, and evidentiary sufficiency of digital‑asset records creates a procedural gap that impairs courts, fiduciaries, and counterparties in evaluating claims.
The submission urges the SEC to distinguish legally between tokenization and canonicalization, arguing that only canonicalized, ledger-native asset objects allow the Commission to examine, audit, and enforce regulatory obligations at the protocol level.
It recommends that Regulation Crypto include architectural requirements for digital-asset securities, potentially through a class definition certification regime that embeds compliance logic in canonical class definitions rather than relying on issuer-by-issuer contract code.
It advises that safe harbors, custody rules, and settlement frameworks must account for ledger architecture, warning that permitting trading on smart contract systems lacking canonical asset identity leaves the SEC unable to enforce against assets the ledger cannot natively identify.
Custody, Public Offerings, RFI Responses, Security Status, Tokenization, Trading
The SEC should continue developing a clear regulatory framework enabling broker‑dealers to custody, trade, and support crypto asset securities, including on ATSs, to reduce legal uncertainty and enable compliant market participation.
The SEC should issue bright‑line standards for tokenized securities, ensuring ATSs can rely on the regulatory status ascribed to a tokenized instrument—critical for avoiding unintended securities‑based swap or unregistered offering violations.
The SEC should provide regulatory clarity permitting on‑chain recordkeeping and settlement by broker‑dealers without triggering clearing‑agency status, enabling lawful integration of distributed‑ledger processes into securities market infrastructure.
SIFMA (Securities Industry and Financial Markets Association)
SIFMA urges that Regulations ATS and NMS must continue to apply fully to tokenized securities and on chain trading platforms, cautioning against lowering standards for crypto ATSs or exempting new entrants from established investor protection obligations.
Consistent registration requirements (exchange, ATS, broker dealer) are deemed essential for any on chain trading venue, as integration into SIPs/TRFs and market wide surveillance is impossible without formal regulatory status.
Price discovery, transparency, and post trade reporting must remain intact, including harmonized volatility controls and prevention of market fragmentation across tokenized, wrapped, and traditional securities trading environments.
