Oct. 17, 2023
Dear Securities and Exchange Commission. I hope this letter finds you in the best of spirits. I wish to extend my thoughtful reflections on the proposed regulations under the title "Amendments Regarding the Definition of “Exchange”" First and foremost, it is important to recognize that cryptocurrencies and digital assets are fundamentally different from traditional securities. They operate on decentralized networks, utilizing blockchain technology to provide transparency, security, and immutability. The existing laws and regulations governing traditional securities are not directly applicable to these new digital assets. Therefore, it is crucial for regulators like the SEC to approach this space with a nuanced understanding of its unique characteristics. The SEC's proposal hints at gross overreach by misclassifying digital assets as securities and smart contracts as exchanges. Imagine a world where every website or application on your Windows/mac device was regulated by unelected officials influenced by unelected lobbyists who function at the behest of personal motivations. Open-sourced applications and technologies are part of the free world. The looming specter of increased regulatory uncertainty has placed undue burdens on DeFi platforms, innovative developers, and me personally. Now, the broadened definition of an "exchange" will inadvertently bring a plethora of DeFi platforms under the purview of SEC oversight, dampening the spirit of innovation that fuels this domain and granting unnecessary overreach. The proposed legislation seems to treat all digital assets as if they were traditional securities, failing to acknowledge the diverse nature of this emerging asset class. This one-size-fits-all approach could have unintended consequences and hinder the development of innovative projects that have the potential to revolutionize various industries. It is important for the SEC to consider the specific attributes of each digital asset and tailor regulations accordingly, rather than imposing blanket rules that may are not suitable for all. Furthermore, the right to transact on a publically accessible/readable general ledger underpins our freedom of movement and right to free speech. The proposition that brokers, digital asset swapping contracts, and digital asset-hosted wallets should disseminate information returns on digital asset dispositions is cause for profound concern. Digital assets are not securities. In our age, where privacy is revered, we must be unyielding in our commitment to safeguarding personal data from unwarranted exposure. Taking away rights given to us by the Constitution is irreversible and indefinite. #RichardisInnocent In the esteemed corridors of DeFi, the tenet "Code is law" is held sacrosanct. It underscores the belief that code, in its eloquence, not only stands as a testament to freedom of speech but is its embodiment. The ethereal choreography of blockchains symbolizes unbridled freedom of movement. The essence of digital assets, reminiscent of trading cards, finds its value in the collective consciousness of the market. Hence, it is only fitting that our regulatory focus sharpens its gaze on the pivotal point of redemption in fiat, as if one were going to a pawn shop versus trading cards with a friend. The clarity and consistency of these regulations warrant meticulous attention. The manifold reporting obligations for DeFi participants, if handled , ensure we are in a web of overlapping and potentially contradictory reports. A harmonized and streamlined reporting paradigm is not just desirable; it is essential. Furthermore, it is imperative to recognize that words wield power. Terms such as exchanges, platforms, CEXs, DEXs, smart contracts/software, and ledgers, pivotal in our discussions, must be delineated with precision and care to ensure a universally shared understanding. In our globalized world, the international implications of these proposals cannot be understated. Overzealous reporting requirements, especially for U.S.-based protocols and their international users, could inadvertently sow discord and raise complex jurisdictional issues. Lastly, let us not lose sight of the potential impact on fledgling ventures and innovative startups. Burdensome mandates will inadvertently quash the very innovation that promises to redefine what it means to self-sovereign and secure a financial future. In conclusion, I implore you to weigh these considerations judiciously as you shape the final regulations. In striking a harmonious balance between rigorous reporting and the inviolability of privacy, we chart a course for a future where digital assets flourish in a secure, enlightened environment. I am, as always, deeply grateful for your unwavering dedication to these pivotal matters. Freedom of Expression: Blockchains, immutable information ledgers, can be seen as a form of expression. Smart contracts, as self-executing contracts with terms directly written into code, embody the freedom to express agreements and transactions. Right to Property: Smart contracts on blockchains facilitate transparent and tamper-proof record-keeping, ensuring individuals' rights to own and transfer property without undue interference. Right to Privacy: Blockchains can provide pseudonymity, ensuring that while all transactions are transparent and verifiable, the identities of the participants can remain private unless they choose otherwise. Due Process: Smart contracts execute exactly as they are coded, ensuring that all parties involved know the expected outcomes and the contract adheres to its terms, upholding the principle of due process. Economic Freedom: Blockchains enable decentralized finance (DeFi), allowing individuals to engage in financial activities without traditional intermediaries, promoting economic freedom and self-sovereignty. Right to Assembly and Association: Decentralized Autonomous Organizations (DAOs) on blockchains allow individuals to come together and make collective decisions, representing a digital form of assembly and association. Transparency and Accountability: Blockchains provide a transparent and immutable record of transactions. This transparency can ensure that entities are held accountable for their actions. Protection from Double Jeopardy: The immutability of blockchains ensures that a transaction, once confirmed, cannot be reversed or duplicated, protecting users from double-spending and ensuring transactional integrity. Equal Protection: Smart contracts treat every participant equally. Regardless of one's status or identity, the contract code executes the same for everyone, upholding the principle of equal protection under the law. Decentralization and State Rights: Just as federalism allows powers to be divided between federal and state governments, blockchains operate on a decentralized model, distributing power among nodes, and reducing the risk of centralized control or failure. With kind regards, Mike Cubilete