Submissions urge U.S. SEC to protect self-custody and clarify dealer rules

One of the submissions, filed under the name DK Willard, points to Louisiana’s HB 488 as a state-level example affirming residents’ right to hold digital assets in self-custody and argues federal policy should keep core investor-protection requirements, including registration, transparency, and anti-fraud and anti-manipulation rules.

The second submission, from the Blockchain Association Trading Firm Working Group, asks the SEC to reaffirm the dealer–trader distinction for firms that trade only for their own account in tokenized equity markets that use DeFi-style rails. It argues that trading one’s own account, without customer solicitation, custody, or agency execution, “is not dealing” and should not require dealer registration under the Exchange Act.

The letter ties the request to the idea of a time-limited “innovation exemption” that would allow on-chain products and services to be offered to US users more quickly, including tokenized equity securities on DeFi trading platforms. It says tokenized equities remain securities and calls for a tailored approach that preserves investor protection while enabling on-chain market structure and settlement.

In plain terms, the “dealer” issue matters because dealer registration can carry ongoing obligations designed for customer-facing intermediaries in traditional markets. The working group says a lack of clarity could discourage liquidity providers that trade only with their own capital from participating, even though those firms are often central to day-to-day liquidity, price discovery, and arbitrage that keeps prices aligned across venues.

The submission also argues existing broker-dealer frameworks were not built for decentralized, smart-contract-based execution and settlement, and it lists rule sets that would need tailoring for on-chain markets, including Reg NMS, CAT reporting, Reg SHO, custody, clearing, and capital requirements. It says firms trading only for their own account could participate “almost immediately,” while broader compliance adaptation for registered intermediaries would take longer.

The filings land as federal negotiations continue over crypto market-structure legislation commonly referred to as the CLARITY Act. White House crypto adviser Patrick Witt has urged the industry to accept compromises to move a bill through the Senate while the political window is open, warning against letting “perfect be the enemy of the good.”

From Davos, Coinbase CEO Brian Armstrong also described ongoing efforts to find a compromise outcome, saying participants are “working together to find a win-win scenario for everyone, especially the American people.”