Oct. 22, 2023
Dear Commissioner, I am writing to express my concerns regarding the Securities and Exchange Commission's proposed rule to expand the definition of "exchange" under the Securities Exchange Act of 1934. While I appreciate the Commission's goals of protecting investors and promoting fair markets, I believe several aspects of this proposal warrant further consideration. Most notably, the proposed rule's overly broad language risks unintended consequences that could stifle innovation and impose unnecessary burdens on businesses. By encompassing systems that use "non-firm trading interest" and "non-discretionary methods" to bring together buyers and sellers, the revised definition would capture an excessively wide range of entities far beyond the scope of traditional exchanges. Ambiguous terms such as "communication protocols" create uncertainty and make consistent compliance difficult, if not impossible. I respectfully submit that a more precise, narrowly tailored definition would achieve the Commission's objectives without hindering technological progress or imposing impractical demands. In addition, the proposal's expansive regulatory approach could put U.S. firms at a competitive disadvantage relative to foreign counterparts. With jurisdictions such as the EU taking a more welcoming stance toward cryptocurrency and decentralized finance, overly rigid domestic regulations may prompt promising startups to domicile elsewhere, costing American jobs and economic opportunities. I urge the Commission to carefully weigh the impacts on competition and consider more flexible alternatives that foster responsible innovation on our shores. Implementation of the proposed rule would also entail significant costs that appear to outweigh potential benefits. In particular, the required registration, recordkeeping, and reporting obligations would divert substantial resources from core business functions without commensurately improving market integrity or transparency. For smaller entities with limited compliance budgets, such burdens could prove prohibitive. A robust cost-benefit analysis taking into account effects on capital formation and jobs is essential before moving forward. Finally, cryptocurrencies and related technologies remain in a relatively early stage of development. Premature imposition of unduly strict regulations risks stifling further evolution, including developments that could enhance operational resilience, risk management, and consumer protection. I believe an incremental approach focused on guidance and targeted safeguards is prudent at this juncture. In closing, I appreciate the opportunity to comment on this important proposal. I am confident that with further deliberation, the Commission can craft a balanced policy that protects investors without throttling innovation. Please do not hesitate to contact me if I can provide additional perspective. I look forward to continued engagement on this issue. Sincerely, Charles J. Abbott