Crypto Task Force Written Input

Proposed legislative language for an amendment to the Securities Act of 1933 that would codify an exemption for certain transactions relating to DePIN. This proposed legislative language includes a definition of DePIN and the requirements for qualifying for such an exemption.

• Clarify that decentralized finance protocols do not constitute "exchanges" or "broker-dealers" under the Exchange Act if there is no meaningful human intermediation or custodial control.
• Establish a safe harbor framework for DeFi trading and lending protocols that are progressing toward decentralization, modeled on Commissioner Peirce’s proposed Rule 195.
• Exclude neutral frontend interfaces from broker-dealer rules if they merely facilitate user access to DeFi protocols without exerting control over user assets or transaction execution.
   

• The letter requests the SEC to issue interpretive guidance or no-action letters for tokenized insurance-backed bonds to provide legal clarity and support innovation.
• It proposes the creation of a regulatory sandbox or pilot program for developing and testing tokenized insurance products in a controlled environment.
• The letter recommends updating the SEC's "Framework for 'Investment Contract' Analysis of Digital Assets" to explicitly address tokenized real-world assets like insurance products.
   

• Fidelity supports the withdrawal of the Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities and recommends identifying best practices for broker-dealers that custody digital assets.
• Fidelity urges the SEC to clarify that a broker-dealer may offer its customers a fully-paid lending program for digital assets.
• Fidelity recommends establishing a safe harbor to support secondary trading of digital assets that are not investment contracts.

• The letter urges the SEC to clarify that tokenizing or creating a cryptographically authenticated digital representation of an asset does not convert a non-securities transaction into a securities transaction.
• TDC recommends that the SEC issue formal guidance and commence rulemaking to exempt bona fide consumer sales of goods and services (including NFTs) from securities laws where no profit or equity interest is offered and there is no contractual obligation for repayment.
• TDC suggests that the SEC provide formal guidance on the application of securities laws to stablecoins and wrapped tokens, ensuring that these digital assets are not unnecessarily classified as securities or investment contracts.

• Establishment of a provisional EUD Token Certification process for self-certifying tokens under the CLARITY Act.
• Implementation of a No-Action Letter mechanism to confirm SEC non-enforcement for compliant EUD token projects.
• Recognition of EUD tokens as non-securities, allowing their use for payments, rewards, and on-platform utility.
   

• The Digital Chamber (TDC) requests the SEC to issue permanent guidance and amend existing rules to clarify how Special Purpose Broker-Dealers (SPBDs) and other broker-dealers may custody crypto asset securities and non-security crypto assets.
• TDC advocates for a technology-neutral, principles-based approach to broker-dealer custody of crypto asset securities, ensuring exclusive control over such assets through various methods, including key sharding and multi-signature wallets.
• TDC requests the SEC to confirm that all broker-dealers, including SPBDs, may custody non-security crypto assets and facilitate trading in both crypto asset securities and traditionally represented securities.

• Ease the asset diversification requirements in Subchapter M to allow more flexibility for funds.
• Expand the types and amounts of income that funds can receive without losing regulated investment company (RIC) status.
• Modify the RIC excise tax distribution requirements to reduce compliance costs impacting investment returns.

• The letter emphasizes that existing securities regulations are fully consistent with the tokenization and integration of blockchain technology within the securities markets.
• It highlights the role of digital transfer agents in enabling the integration of registered and exempt securities by recording and tracking ownership within decentralized finance (DeFi).
• The letter asserts that tokenized securities, supported by digital transfer agents, can improve market transparency, efficiency, and corporate governance while ensuring re

• Orca Protocol is not classified as an exchange, broker, dealer, or clearing agency under the Exchange Act.
• Orca Protocol operates autonomously and does not involve third-party custody, discretionary control, or intermediation.
• Orca Protocol supports a principle-based regulatory framework that emphasizes transparency, autonomy, and user control.