June 14, 2023
I believe this proposal is unnecessary and goes directly against the SEC's mission of protecting investors.
The new definition of \"exchange\" is overly broad, unclear and may include entities that never actually hold or exchange securities.
The proposal appears to be intentionally targeted against crypto assets without substantially affecting other asset classes, which is not acknowledged in the proposal itself or related press releases.
The SEC has not clarified the definition of an entity, which includes \"groups of people\" and may also include immutable smart contracts (e.g. liquidity pools, DEXes) that by definition cannot defend themselves, as seen in the OFAC Tornado Cash sanctions case.
This proposal effectively expands the SEC's own authority, which is both legally and morally dubious and may be unconstitutional. Federal agencies do not, and should not, have the right to define the boundaries of their power without consulting Congress.
There is currently no way for a crypto exchange, centralized or decentralized, to register as required by this proposal, even if the Commission's chair insists otherwise.
The SEC's position on what crypto assets are considered securities is unclear and appears to be constantly changing. There is no official declaration or press release about this. Commissioners have said on different occasions that all crypto assets are securities, all are commodities, only those that fulfill the definition of an investment contract are securities, those that were initially distributed through an ICO are securities, and so on.
Mr Gensler has expressed his opposition to the crypto market and its participants multiple times. Considering the power he has in the SEC's decision making process, the commission should refrain from making any changes that primarily affect crypto assets until a more neutral chair replaces him.
If this proposal passes and the SEC starts enforcing it, US investors will be forced to use foreign unregulated exchanges that are more likely to defraud them. Expecting the 10 to 20 percent of Americans who hold crypto to stop participating in the market is simply unrealistic.