It would also establish a conditional safe harbor allowing crypto assets to cease being subject to investment contracts once issuers complete or permanently abandon promised essential managerial work and file a transition report with the SEC.
Submissions from Bitwise, Nasdaq, the Alternative Investment Management Association, community banks and investor advocates reveal competing priorities that could shape the final regulations.
Wall Street and crypto firms push for broader token access
Asset manager Bitwise wants the SEC to make it easier for investment firms to determine which cryptocurrencies they can hold in exchange-traded products, indexes and private funds.
In its Oct. 19 letter, Bitwise said fund sponsors currently face substantial uncertainty when assessing whether a token remains subject to an investment contract.
The firm wants asset managers to rely on issuers’ public transition reports after an SEC review period expires without a challenge. It also requested protection for good-faith reliance if regulators subsequently dispute an issuer’s classification.
Such protections could reduce the legal risks of adding cryptocurrencies to investment products, although separate fund approval and compliance requirements would still apply.
The Alternative Investment Management Association, representing hedge funds and other alternative asset managers, wants the proposed safe harbor extended to investment adviser and fund regulations.
It also requested clearer custody requirements and resale protections, arguing that managers need consistent rules for acquiring, holding and disposing of digital assets.
Meanwhile, Hyperliquid Policy Center wants the SEC to provide protection while crypto projects remain under development, rather than requiring issuers to complete or abandon their promised work first.
The advocacy group also wants greater flexibility for airdrops and transition reports, warning that publicly disclosing detailed legal reasoning could expose token issuers to litigation.
Traditional market operators offered more conditional support.
Nasdaq endorsed the framework but urged the SEC to explicitly exclude tokenized stocks, bonds, and ETF shares from the exemptions.
The exchange argued that tokenized versions of traditional securities must retain existing registration, disclosure and trading requirements to prevent crypto platforms from gaining regulatory advantages over established securities markets.
Community banks warn of deposit flight as opponents threaten legal action
The Independent Community Bankers of America raised broader financial stability concerns, warning that easier crypto issuance could accelerate stablecoin adoption and divert deposits away from smaller banks.
The association argued that growing cryptocurrency trading and settlement activity could concentrate customer funds at stablecoin issuers, exchanges and large reserve banks, potentially increasing community banks’ funding costs and reducing lending.
It cited an earlier modeled scenario suggesting stablecoin incentives could shift as much as $1.3 trillion from community banks and reduce lending capacity by approximately $850 billion.
Those estimates concern potential stablecoin growth rather than the direct impact of the SEC proposal. The association nevertheless wants regulators to assess the cumulative effects of crypto-friendly policies before approving additional exemptions.
It requested a supplemental economic analysis, tighter eligibility thresholds, periodic monitoring of deposit migration, and authority to suspend exemptions if material risks emerge.
Investor advocates took a more adversarial position.
Public Citizen urged the SEC to abandon the proposal and resume cryptocurrency enforcement actions, arguing that the exemptions would encourage speculative fundraising while weakening protections for retail investors.
Former SEC enforcement official John Reed Stark and Duke researcher Lee Reiners separately demanded the proposal’s withdrawal, arguing that the agency lacks sufficient statutory authority to create the exemptions.
They warned that a final rule resembling the current proposal would face an immediate legal challenge, potentially exposing crypto issuers to further uncertainty after adopting the new framework.
The SEC must now review the submissions and determine whether to revise the offering thresholds, strengthen investor disclosures, or commission additional economic analysis before adopting final rules.
Any decision to proceed without addressing the statutory objections could shift the dispute to federal courts, where a challenge could delay implementation of the exemptions and the proposed pathway for tokens to exit investment-contract treatment.
