Jun. 13, 2023
June 13, 2023 Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed amendments to Exchange Act Rule 3b-16, specifically as it pertains to the definition of an exchange. I believe that the SEC's involvement in this area, particularly in relation to decentralized exchanges (DEXs) and other crypto-related platforms, could have unintended consequences for the burgeoning field of decentralized finance (DeFi). Chairman Gary Gensler has previously acknowledged the potential of blockchain technology and the importance of fostering innovation in this space. In a speech at the Aspen Security Forum on August 3, 2021, he stated, "I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight. This leaves prices open to manipulation. This leaves investors vulnerable." While I agree with Chairman Gensler's emphasis on investor protection, I believe that the proposed amendments could stifle innovation and limit the potential benefits of DeFi. Decentralized exchanges operate on blockchain technology and are fundamentally different from traditional exchanges. They allow peer-to-peer trades without the need for an intermediary, which can reduce costs and increase financial inclusion. By applying traditional exchange rules to DEXs, the SEC could inadvertently limit these benefits and stifle innovation in this space. Furthermore, the proposed amendments could create regulatory uncertainty for DeFi projects. The definition of an exchange under Rule 3b-16 is broad and could potentially encompass a wide range of activities in the DeFi space. This could deter innovation and investment in this area due to the fear of potential regulatory action. I urge the SEC to consider these potential consequences and to approach the regulation of DEXs and other DeFi platforms with caution. Rather than applying traditional exchange rules to these new technologies, the SEC should consider developing a new regulatory framework that acknowledges the unique characteristics and potential benefits of DeFi. Thank you for considering my comments.