The SEC Crypto Working Group is receiving submissions regarding self-custody rights and DeFi rules in tokenized markets.
The U.S. Securities and Exchange Commission on Tuesday updated its Crypto Working Group’s “Written Input” page. Two new submissions focus on self-custody rights and regulation of proprietary trading tokenized and DeFi markets. Stakeholders want to have an impact on federal guidance and ensure investor protection and market stability.
Industry calls for respect for custody rights and innovation exemptions
One such submission, authored by DK Willard, highlights Louisiana retail users and the HB 488 legislation. It argues that federal regulations should honor custodial rights and enforce strong anti-fraud measures. Thus, state-level protections should not be obsolete in the context of a review of federal regulations.
A second contribution on broker rules in tokenized markets was provided by the Blockchain Association’s Trading Firms Working Group. They claim that companies trading DeFi assets on their behalf are not necessarily resellers.
Related reading: Crypto News: SEC Chairman Supports Quick Approval of Crypto Market Bill
Cryptocurrency industry regulators and government consultants are urging the compromise to move forward. Patrick Witt, senior crypto advisor at the White House, stressed the need to balance regulation and market innovation. He stressed that compromise was necessary as long as Congress was dominated by Republicans.
On Wednesday in Davos, Coinbase CEO Brian Armstrong said CLARITY is making progress. He stressed that collaboration between regulators and industry would create a win-win situation. Armstrong further emphasized that collaboration was necessary to protect American investors.
The submissions indicate ongoing consultation between industry, state lawmakers and federal officials. They suggest that self-custody protections and DeFi business innovations still define US political structures. Furthermore, both contributions emphasize transparency in order to avoid unintentional limitations on market participants.
Industry calls for clarity on DeFi and tokenized stock rules
The new contributions have not yet been publicly commented on by SEC officials, which has generated anticipation in the market. Analysts say the submissions may affect how the agency structures guidance on DeFi exchanges and self-custody protections. The first response shows that stakeholders are eager to influence regulation.
These contributions also demonstrate the coordination of priorities in legislative processes between advocacy groups and private companies. The Blockchain Association highlights that liquidity providers need exemptions to operate effectively. Therefore, regulations must strike a balance between innovation and guarantees for investors to maintain confidence.
Patrick Witt also indicated that lawmakers were looking to address both stablecoin yield, DeFi liquidity, and investor guarantees. He stressed that regulatory clarity would facilitate safer markets and responsible growth. Industry participation is also essential to make the rules possible and enforceable.
Overall, the submissions indicate a consistent attempt to comprehensively streamline crypto regulations. In new directions, they emphasize the ability to balance state rights, federal control, and market innovation. Accordingly, the SEC’s analysis will emphasize investor protection, market efficiency, and transparency to all market members.
The rules may impact broader debates over U.S. and global crypto regulation, if instituted. Stakeholders will need guidance that will offer clear direction regarding DeFi trading, tokenized stocks, and custodial rights.
