Quick Breakdown
- The SEC received two new crypto policy submissions addressing self-custody rights and DeFi trading rules.
- One warns against federal exemptions that could weaken investor protections, while the other seeks clarity on dealer registration for proprietary traders.
- The filings come as Congress debates the CLARITY bill, with industry leaders pushing for a compromise to secure passage.
The US Securities and Exchange Commission’s Crypto Task Force has received two fresh policy submissions that reignite debate around self-custody rights and how proprietary trading in tokenized and decentralized finance (DeFi) markets should be regulated.
The filings, added to the task force’s “Written Input” page on Tuesday, come as lawmakers continue negotiations on a federal crypto market structure bill aimed at setting clearer rules for the industry.
Focus on self-custody and DeFi trading rules
One submission, filed by an individual identified as DK Willard on behalf of Louisiana retail users, highlights the state’s HB 488 law, which explicitly protects residents’ rights to self-custody digital assets. The letter argues that any forthcoming federal crypto framework should uphold strong registration standards, transparency obligations, and anti-fraud and anti-manipulation protections.
It cautions that carve-outs included in some federal proposals could allow developers or platforms to sidestep core investor-protection rules, potentially exposing consumers to higher risks of fraud and financial crime.
The second submission comes from the Blockchain Association Trading Firm Working Group. It urges the U.S. Securities and Exchange Commission to clarify that firms trading tokenized equities or DeFi assets solely for their own accounts without soliciting customers, holding client funds, or executing trades on behalf of others should not automatically be classified as “dealers” under the Exchange Act.
The group also notes that existing broker-dealer regulations were built for traditional markets and may require adjustments to account for smart-contract-based settlement and on-chain market structures.
CLARITY talks and industry pressure build
The submissions land amid ongoing negotiations over the federal crypto market structure bill known as CLARITY, which is being shaped against the backdrop of broader debates on stablecoin yield, DeFi liquidity, and investor protection.
Patrick Witt, a senior White House crypto adviser, has reportedly encouraged industry participants to accept compromises to push the bill through while Republicans still control Congress and the Trump administration remains in office.
Speaking from Davos, Brian Armstrong, CEO of Coinbase, said momentum around CLARITY is building as stakeholders work toward common ground.
“We’re all working together to find a win-win scenario for everyone, especially the American people,”
Armstrong said.
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