August 7, 2025

By electronic submission

Commissioner Hester M. Peirce and Members of the SEC Crypto Task Force
U.S. Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-0213

RE: Request for Comment on There Must Be Some Way Out of Here

To The Crypto Task Force:

The Securities Industry and Financial Markets Association¹ and its Asset Management Group² (collectively, “SIFMA”) are submitting additional feedback³ in response to the statement by Commissioner Hester M. Peirce entitled “There Must Be Some Way Out of Here” (the “Statement”) requesting information from stakeholders on activity involving blockchain-based digital assets.⁴

The U.S. securities markets are the envy of the world, being not only the largest but also the deepest, most liquid, and most efficient. Investors – both institutional and retail – enjoy narrow spreads, low transaction costs, fast execution speeds, and strong investor protections. Efficient and resilient market structure is key to sustaining investor confidence and participation underpinning our markets. The goal of regulators and market participants alike is to promote market resiliency and ensure the U.S. securities markets continue to benefit investors of all types; promoting investor protections and market integrity is consistent with embracing innovation.

Our markets also play an essential role in capital formation. Going public brings added stability by providing a permanent and liquid source of capital for corporations to operate and grow their businesses. Primary and secondary markets are symbiotic in nature. Healthy, efficient, and liquid secondary markets give issuers confidence their capital needs will be met at a good price level in primary markets.

That said, one can always strive to develop new products and services as markets and technologies continue to develop. This includes adapting new technologies to achieve operational efficiencies, searching for new ways to transact and, generally, designing market structure to maximize efficiencies. Merging technological innovation with the investor protection and market
integrity that exist today could benefit both investors and issuers. When considering what the landscape should look like for digital assets, regulators and market participants should ask: how would this innovation, product, or change to processes impact existing investor protections and confidence in the U.S. securities markets?

SIFMA members bring to bear decades of experience operating in highly competitive, dynamic markets and adapting to changes in technology and investor demand to successfully grow their businesses, benefit their customers, and modernize the U.S. securities markets, which are the envy of the world. As part of these efforts, over the years SIFMA and its members have regularly worked to assist regulators in designing flexible frameworks that allow for responsible innovations as markets and market conditions evolve. We continue to regularly engage in and strongly support responsible innovation in the securities markets. This perspective also applies to the digital assets sector, and we commend the SEC for its ongoing work to foster innovation and bring greater regulatory clarity to digital asset markets.

This letter focuses on the important benefits and protections current market structures provide to investors and why they should be utilized to allow new operating models to achieve the same level of success as the U.S. securities markets; puts forward a number of considerations for the design of an innovation exemption or regulatory sandbox style framework; outlines a number of opportunities for additional innovation within existing regulatory frameworks that our members are exploring; and discusses the importance for regulators to clearly define tokenization and ensure regulatory frameworks for issuance and trading of tokenized securities are appropriately tailored to facilitate investor protection, market confidence, and ultimately, broad and sustainable adoption.

Since this January, the SEC has engaged in a structured process to holistically understand the implications of blockchain-based operating models and the impact of the emerging digital assets ecosystem on the regulated securities markets. SIFMA has been encouraged to see this measured, comprehensive review, covering the broad range of products and functions under the SEC’s purview, which has provided a range of opportunities for engagement from market participants broadly, including a series of roundtables, industry dialogue, and the RFI process. As the SEC looks to make concrete changes in its rulesets, we encourage the Commission to continue to follow this careful approach for developing, proposing, and approving rules, which is critical in light of the importance of the U.S. securities markets and the regulatory frameworks that govern them.

Executive Summary

SIFMA advances the following considerations and recommendations in this letter:

Established Market Structures Provide Vital Benefits and Protections to Investors which the Commission Should Utilize When Exploring New Operating Models

• To facilitate broad investor adoption and long-term viability of new operating models and fair, efficient, and orderly overall markets, market structures for tokenized assets that comprise securities or derivatives should retain the benefits and protections provided for investors, issuers, and markets embedded in current market structures. These principles include
  market transparency, market linkages, customer optionality, best execution and suitability standards, disclosure requirements, customer asset safeguards, and appropriate disclosure and oversight of conflicts of interest.
• Modernization of the securities markets should reinforce and refine, not bypass, key regulatory responsibilities derived from existing regulatory frameworks. While blockchain networks can support new models for securities issuance and trading, any regulatory changes should utilize the protections provided when various specialized parties perform separate roles within the same ecosystem. Replacing, consolidating, or bypassing these roles without establishing equally rigorous and effective safeguards via other means poses significant and unnecessary risks to issuers, investors, market quality, and investor confidence.
• Custody of all types of assets must be based on the foundational principles of (1) segregation of client assets when held by a third party, (2) separation of custody from trading and asset management, and (3) proper control over transfers. Failures in these areas—seen in unregulated crypto trading platforms like FTX, which allowed management to easily access customer assets—exposes investors to significant risk, slows broader adoption and highlights the need for high custody standards.
• The existing securities regulatory framework has been thoughtfully designed over many years so that separate parties are responsible for (and also work collaboratively to facilitate) issuance, trade execution, and custody of customer assets, which, together with appropriate disclosures, mitigates the conflicts of interest that otherwise would pervade the securities markets. Allowing vertically integrated digital asset platforms in the securities and derivatives markets without appropriate controls likely will increase these risks, which could lead to diminished investor confidence and participation in these markets.
• To ensure transparency and market interconnectivity, trading venues that include tokenized equity securities should connect to established market transparency, trade reporting, disclosure requirements and surveillance systems (or new methods of providing these functions)—like Securities Information Processors (“SIP”) that distribute consolidated equity market data, the FINRA Trade Reporting Facilities (“TRFs”) and FINRA Over-the-Counter Reporting Facility (“ORF”) for off-exchange trades, Trade Reporting and Compliance Engine (“TRACE”), and the Consolidated Audit Trail (“CAT”). These steps are critical to continue to provide investors with wide access to near real-time quote and trading information and allow for consistent pricing across the market as well as market oversight across current securities and digital securities markets.
• Transfer agents for tokenized securities should not be assigned expanded roles (e.g., taking on broker-dealer responsibilities) unless it is as a part of a comprehensive modernization of transfer agent rules to ensure equivalent investor protections. The experiences of certain platforms which operated outside these regulatory constraints, seen most notably in the failure of the FTX Group, highlights a number of risks which can emerge absent robust regulatory frameworks governing the full spectrum of exchange, custodial, and brokerage functions.

1. SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation, and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association. [↩]
2. SIFMA AMG brings the asset management community together to provide views on policy matters and to create industry best practices. SIFMA AMG’s members represent U.S. and multinational asset management firms whose combined global assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. [↩]
3. SIFMA response to the Request for Comment on There Must Be Some Way Out of Here, May 9, 2025, available at: https://www.sifma.org/wp-content/uploads/2025/05/SIFMA-SEC-Crypto-RFI-Initial-Response-May-2025.pdf. [↩]
4. As is our convention when commenting on these topics, we refer to “digital assets” throughout this letter; however, we recognize that the term “crypto assets” is also frequently used (including in the Statement) and for purposes of this letter intend these two terms to be viewed interchangeably. [↩]