The US Securities and Exchange Commission’s Crypto Task Force is facing renewed pressure from industry groups and individual contributors as questions around self-custody rights and the scope of dealer regulation in decentralized finance move back into focus.
On Tuesday, the Task Force’s public “Written Input” page added two new submissions that reflect a broader tension shaping US crypto policy: how to protect investors without collapsing core features of on-chain markets, particularly self-custody and non-custodial trading.
One submission, filed by an individual identified as DK Willard, centers on the experience of retail crypto users in Louisiana and ties state-level protections directly to the federal debate now unfolding in Washington.
Willard points to Louisiana legislation such as House Bill 488, which explicitly affirms residents’ right to self-custody digital assets, arguing that these protections should not be diluted by federal market structure proposals.
The filing shows that Congress is considering frameworks that include registration, transparency, and anti-fraud standards, but certain exemptions risk allowing developers or platforms to sidestep core investor protections.
In Willard’s view, weakening self-custody 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 Firm Working Group focuses on how proprietary trading firms should be treated when providing liquidity in tokenized equity markets that operate on DeFi infrastructure.
The group argues that long-standing distinctions in securities law between dealers and traders should continue to apply on-chain.
Trading for one’s own account, without customer solicitation, custody, or agency execution, should not trigger dealer registration under the Exchange Act, the filing says, even when that trading occurs through smart contracts and decentralized venues.
The association frames this issue as central to whether tokenized equity markets can function at all during any SEC-approved innovation exemption or sandbox.
Without legal certainty, proprietary trading firms may avoid on-chain markets altogether, leaving tokenized equities without reliable liquidity, price discovery, or arbitrage.
The group stresses that existing broker-dealer rules, including those governing clearing, custody, reporting, and capital, were designed for intermediated markets and will take time to adapt to atomic settlement and smart contract execution.