Last Updated: June 16, 2025
On February 21, SEC Commissioner Peirce published “There Must Be Some Way Out of Here,” a request for public input to assist the Crypto Task Force as they consider policy initiatives across a wide range of digital asset issues that echo most, if not all, of our Token Alliance Leadership Committee 2025 SEC Policy Priorities. The request sets out 48 detailed questions. TDC has broke out our efforts around this project into 13 different workstreams. We launched the first seven of these workstreams at the beginning of April and are now starting to provide feedback to the SEC on a rolling basis as we complete each of these workstream’s set of responses. See Commissioner Peirce’s questions and our responses below.
Question 3
Certain crypto assets are used in a variety of functions inherent to the operation of a blockchain network, such as mining or staking as part of a consensus mechanism or securing the network, validating transactions or other related activities on the network, and paying transaction or other fees on the network. These technology functions may be conducted directly or indirectly, such as through third-party service providers. What types of technology functions are inherent to the operation of a blockchain network? Should the Commission address the status of technology functions under the federal securities laws and, if so, what issues should be addressed? TDC response here.
Questions 10-14
TDC members had differing views on whether the SEC should pursue a token safe harbor along the lines of the one proposed by Commissioner Hester Peirce in 2019 while Congress is actively considering market structure legislation that would address the same problem.
While passage of market structure legislation is not guaranteed, it is a clear priority for the Trump Administration and the leadership of the Senate Agriculture, Senate Banking, House Financial Services, and House Agriculture committees. If the SEC adopts a safe harbor that looks drastically different legislation passed by Congress, the industry may be left in the unenviable position of dealing with a series of shifting regulatory frameworks within the next four years.
As we know, Congress has not yet passed legislation and the SEC is not bound to any bill text but we urge the SEC’s staff to coordinate and consult with relevant committee staff working on legislation around any potential safe harbor they might propose.
If the SEC goes forward with a safe harbor, the SEC should clarify that crypto assets sold pursuant to an investment contract under the safe harbor are not the security itself, and that secondary trading of the crypto assets sold pursuant to the safe harbor do not constitute investment contract transactions under the securities laws. Also, the Commission should avoid using decentralization as the threshold for determining whether a crypto asset is sold pursuant to a securities transaction. Imposing regulatory definitions of decentralization may distort otherwise preferable, organic efforts toward decentralization and optimization of security and safety of protocols.
Questions 21-22
Broker-dealers should be permitted to custody both crypto asset security and non-security assets, both on a proprietary basis and for third parties. In addition:
- We ask that the SEC work with Securities Investor Protection Corporation (SIPC) to confirm that crypto asset securities are securities for Securities Investor Protection Act (SIPA) purposes.
- We ask the SEC to take a technology-neutral, principles-based approach to broker-dealer custody of crypto assets that requires the broker-dealer to maintain exclusive control of such assets,
- We propose a path for broker-dealers to establish possession or control of crypto asset securities and non-security assets that will provide flexibility as new technologies develop and request amendments to Rule 15c3-3 to codify these changes,
- We ask that the SEC make clear that a Section 3(a)(6) Bank can custody not just crypto asset securities but all uncertificated securities, and
Questions 27-29
As a critical first step, the SEC must take immediate action to confirm the scope of the existing custody rules with respect to crypto assets and revoke the Safeguarding Proposed Rules from March 2023 since Many crypto assets, including BTC, ETH, stablecoins and many other crypto assets, are not “securities” or “client funds” and do not fall under the existing custody rule. In addition;
- We urge the SEC to expand the definition of “qualified custodian” to expressly include state-chartered trust companies and other types of entities not expressly enumerated that meet substantially similar standards;
- We propose a non-exclusive “safe harbor” to permit RIAs to self-custody crypto asset securities based on principles-based concepts such as protection of client crypto asset securities, segregation of client and proprietary assets, auditability, and disclosure of potential material risks and conflicts; and
- We recommend that the SEC adopt a principle-based approach to allow RIAs to engage in trading, voting, staking and other activities while safeguarding assets.
Questions 35-39
- If the listing exchange does not have an SSA with a regulated market and no regulated market for the crypto asset underlying an ETP exists, could the listing exchange address concerns regarding fraud and manipulation based on the size and liquidity of the underlying spot market? What would be an appropriate measure of size and liquidity that would address these concerns? Are there more appropriate ways to address concerns regarding fraud and manipulation?
- How should the Commission consider market capitalization, unique number of wallets, trading volume, the number of spot markets, geographic distribution of spot markets, size and frequency of price divergences, or speed of price convergence/arbitrage?
- How should the Commission consider crypto asset-based ETPs that are investing in assets that are already referenced in crypto asset-based exchange-traded funds registered as investment companies under the Investment Company Act?
- What factors should the Commission consider with respect to an SSA between an
exchange listing an ETP on a crypto asset and a spot crypto market? - How should the Commission weigh the reliability, frequency, and dissemination of pricing information on the crypto assets underlying the ETP in its consideration?
If you have any questions, please reach out to Policy@digitalchamber.org