Wintermute Urges SEC: Classify Bitcoin & Ethereum as Technical Resources, Not Securities

The regulatory landscape for cryptocurrencies in the United States remains a critical determinant for market stability and innovation. Amid ongoing calls for clarity, leading market maker Wintermute has formally responded to the U.S. Securities and Exchange Commission (SEC)’s request for comment on tokenized securities. The firm’s intervention underscores a pressing need for a precise regulatory framework, particularly concerning the classification of foundational digital assets, to prevent stifling growth and driving economic activity abroad.

• Urgent call for explicit definition of “network tokens” (e.g., Bitcoin, Ethereum) as “technical resources.”
• Advocacy for clear rules allowing licensed dealers to trade and custody tokenized securities.
• Support for both centralized and decentralized markets, with liquidity provision not automatically triggering registration.
• Warning against misclassifying core digital assets as securities, citing risks of liquidity loss and market exodus.
• Plea for transparent guidance on network tokens, similar to prior SEC decisions on staking, stablecoins, and memecoins.

Defining “Network Tokens” as Technical Resources

At the core of Wintermute’s recommendations is a plea for the SEC to provide an explicit definition for what it terms “network tokens,” citing prominent examples such as Bitcoin and Ethereum. The company argues that these native blockchain assets function primarily as “technical resources,” fundamentally distinguishing them from traditional securities. This distinction, Wintermute contends, is crucial for fostering a robust and liquid market within the United States.

Key Areas for Regulatory Guidance

Beyond the classification of native tokens, Wintermute outlined three key areas requiring immediate regulatory guidance to support the broader adoption of tokenized securities by liquidity providers.

Clarifying Dealer Capabilities

First, the firm advocated for clear rules affirming that licensed dealers should be permitted not only to trade but also to custody tokenized securities.

Supporting Diverse Market Structures

Second, it urged support for both centralized and decentralized markets, asserting that the act of providing liquidity should not automatically trigger registration requirements.

Reiterating Network Token Classification

Finally, Wintermute reiterated the necessity of a definitive classification for network tokens, which constitute a significant portion of the overall cryptocurrency market capitalization.

Ramifications of Misclassification

The market maker warns that an erroneous classification of these core digital assets as securities would carry severe ramifications. Such a move, it argues, would inevitably lead to a significant loss of liquidity, escalate operational costs for market participants, and prompt an exodus of counterparties from the U.S. market. Wintermute explicitly stated, “Such a mistaken classification risks stifling innovation and incentivizing blockchain development and trading activity outside U.S. markets.”

Promoting Innovation and Investor Protection

Wintermute acknowledged and commended the SEC’s prior decisions to exclude staking, stablecoins, and memecoins from securities classification. The company now advocates for a similar level of transparent guidance concerning network tokens, emphasizing that their use for speculative purposes does not inherently transform them into securities. Providing this clarity, Wintermute concludes, would not only align with the broader goal of investor protection but also significantly propel the industry’s development and safeguard America’s leadership in digital asset innovation.