Oct. 15, 2023
Hello, As a United States citizen, I would like to comment regarding the definition of an "exchange" under the Securities Exchange Act of 1934. I believe the expanded definition covers activities and platforms beyond what should reasonably be considered an exchange. The idea that "each person operating through a common enterprise could be viewed as participating in the operation of an exchange" is overly broad. Taken in the literal sense, this analysis could imply that every single individual user of a smart contract protocol is participating as an operator of an exchange. However, users of blockchain smart contract protocols should not be automatically identified or classified as operators of an exchange simply because the transactions are peer-to-peer. I suggest that DeFi platforms such as Uniswap, are not exchange platforms. Rather, I propose that they are decentralized software, which anyone is able to run. I suggest that a better and more accurate classification of decentralized exchanges (DEXs) is a data exchanger. It is better to assume that each individual is merely publishing data to a blockchain, instead of automatically assuming that all digital assets traded on a DEX are securities. This decentralized exchange of data is no different from the way the internet functions. For example, Ebay and Facebook Marketplace exchange data, so subject to the same rules, then are they now considered to be financial exchanges? Ebay online marketplace is not regulated as a financial exchange, yet Ebay trades data which represents digital and physical goods. Virtual assets on a blockchain or tokenized real-world assets on a blockchain, traded on a DEX, are no different conceptually. I propose the definition be narrowed, tailored to centralized entities and platforms providing exchange-like services, where regulation is far more practical and appropriate. Analysis should not focus only on the technical structure, but it should focus on the actual functions of the platforms. Flexible but reasonable oversight for centralized crypto trading platforms, should not sweep-in individuals who are not actually operating exchanges. Thank you. Sent with Proton Mail secure email.