Wintermute said clear SEC guidance would keep US markets competitive, foster regulator dialogue and support innovation in digital assets.
Trading company and market maker Wintermute asked the United States Securities and Exchange Commission (SEC) to confirm that network tokens should not be classified as securities.
In formal feedback to the agency’s request for comment, the company said clear guidance on the security status of tokens is necessary to avoid the misapplication of securities laws and ensure the continued growth of crypto markets.
Wintermute said that “network tokens,” which are “intrinsically connected to the functioning of a decentralized network or protocol,” are necessary technical inputs for blockchain networks. Because of this, the company said, they fundamentally differ from financial products or securities.
The company mentioned Bitcoin (BTC) and Ether (ETH) as examples of network tokens that should not be classified as securities.
If network tokens were classified as securities, every trade of such digital assets in the US might require regulatory compliance with securities laws. This could affect the liquidity of the tokens, raise costs for traders and ultimately push activities offshore.
“Such misclassification risks stifling innovation and driving blockchain development and trading activity outside of US markets,” Wintermute wrote.
The company said network tokens do not meet the criteria for securities even if they are later traded for profit or used in fundraising rounds.
Wintermute said network tokens function more like commodities, collectibles and real estate. These can all be bought for investment purposes without being treated as securities.
Apart from its recommendations, the company also welcomed SEC guidance excluding stablecoins, memecoins and staking activities from the securities classification. It stressed that the same level of clarity should be extended to network tokens.
“Clear guidance across these areas will keep US markets competitive, encourage continued dialogue with regulators, and create optimal conditions for adoption and innovation to thrive,” the company said.
Cointelegraph reached out to Wintermute for more information, but did not receive a response before publication.
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In addition to clarifying the issue of network tokens, the company also asked the SEC to ensure that decentralized finance (DeFi) can flourish alongside centralized markets for tokenized securities.
Wintermute said the agency should empower both avenues to compete. The company said this would promote innovation, improve investor options and create a global marketplace for tokenized securities.
