Oct. 16, 2023
Dear SEC Commissioners, I am writing to express my concerns regarding the proposed amendments to the definition of "exchange" under the Securities Exchange Act of 1934 and the potential impact on digital asset markets. While I understand the SEC's desire to facilitate capital formation by reducing regulatory burdens on alternative trading systems (ATSs), I believe that providing overly broad exemptions from exchange registration requirements could pose significant dangers to emerging digital asset markets. In particular, I worry that exempting a proliferation of lightly-regulated ATSs in the cryptocurrency space could lead to several negative outcomes: - Increased fragmentation that reduces price discovery and liquidity while advantaging sophisticated traders over retail investors - Reduced transparency that masks trading volumes, significant exposures, and market manipulation from regulators - Weaker resiliency and stability in times of market stress due to dispersed liquidity and lower clearing requirements - Hampered innovation if companies cannot raise growth capital efficiently through transparent public markets Given the nascence and unique risks inherent to the cryptocurrency ecosystem, I believe that strong oversight and thoughtful regulation is needed, not deregulation. While your intent may be to foster competition, the unintended consequences could be profoundly detrimental to consumer protection and capital formation. I urge the SEC to reconsider the expanded ATS exemptions and work to enhance regulatory harmonisation across digital asset venues. Exchange-level safeguards should be strengthened, not diluted. Thoughtful evolution is needed to bring this new market into maturity, not revolution. Thank you for your consideration of these concerns as you finalise the exchange definition rules. Sincerely, Johny einsten