The U.S. Securities and Exchange Commission’s Crypto Task Force is facing renewed pressure from industry groups and individual contributors as questions surrounding custodial rights and the scope of broker-dealer regulation in decentralized finance return to center stage.
On Tuesday, the working group’s public “Written Input” page added two new submissions that reflect a broader tension shaping U.S. crypto policy: how to protect investors without collapsing the fundamental features of on-chain markets, particularly self-custody and non-custodial trading.
One submission, filed by an individual identified as DK Willard, focuses on the experience of retail crypto users in Louisiana and directly connects state-level protections to the federal debate currently taking place in Washington.
Willard points to Louisiana legislation such as House Bill 488, which explicitly affirms residents’ rights to self-custody their digital assets, arguing that these protections should not be diluted by federal proposals on market structure.
The filing shows that Congress is considering frameworks that include registration, transparency and anti-fraud standards, but some exemptions risk allowing developers or platforms to circumvent key investor protections.
According to Willard, weakening self-preservation protections could expose consumers to fraud and financial crime rather than supporting responsible innovation.
At the same time, a more technical submission from the Blockchain Association’s Trading Firms Working Group focuses on how proprietary trading firms should be treated when providing liquidity on tokenized equity markets that operate on DeFi infrastructure.
Source: SEC
The group argues that long-standing distinctions in securities law between brokers and dealers should continue to apply on-chain.
According to the filing, trading on its own account, without customer solicitation, custody, or agency execution, should not trigger a broker-dealer’s registration under the Exchange Act, even when such trading occurs via smart contracts and decentralized sites.
The association views this question as key to whether tokenized equity markets can operate at all during any SEC-approved innovation exemption or sandbox.
Without legal certainty, proprietary trading firms can avoid on-chain markets altogether, leaving tokenized stocks without reliable liquidity, price discovery, or arbitrage.
The group emphasizes that existing broker-dealer rules, including those governing clearing, custody, reporting and capital, were designed for intermediated markets and that it will take time to adapt to atomic settlement and smart contract execution.
