Oct. 22, 2023
Dear committee, As an attorney specializing in financial regulation, I object to the Securities and Exchange Commission's (SEC) proposal to expand the definition of “exchange” to include platforms that facilitate cryptocurrencies. This proposal is contrary to the intrinsic nature of cryptocurrencies and is unlikely to stand up to judicial review. First, cryptocurrencies like Bitcoin are inherently decentralized. There is no central authority linking clear intentions to the currency. It is simply code, the meaning of which is determined by individual users. The SEC cannot possibly determine the intentions of something that does not have a central issuer. Secondly, owning cryptocurrencies does give ownership rights, but no rights such as dividends or voting rights. Cryptocurrencies therefore resemble a means of payment or exchange rather than a security. The majority of users see cryptos as digital currencies, not as investments. Third, most cryptocurrencies do not generate income such as dividends. Their value is purely speculative, based on future expectations. This distinguishes cryptos from securities with intrinsic value and income potential. Furthermore, cryptocurrencies are extremely volatile and risky. Investors are aware of this and accept this risk. The choice of whether or not to invest in such assets must remain with the investor. It is also virtually impossible to regulate the crypto industry in the same way as traditional securities markets. The technology simply does not allow this. Moreover, this would lead to a competitive disadvantage compared to abroad. In addition, dependence on complex technology poses unique risks that are absent from traditional investments. Cryptocurrencies have no physical collateral and sometimes offer a degree of anonymity. In short, cryptocurrencies are inherently different from traditional securities, partly due to their decentralized, technological and cross-border nature. They are often used as a means of payment or exchange within a community, not as an investment. The SEC's proposal to impose new rules ignores these fundamental differences. Therefore, I doubt whether this will hold up legally and recommend restraint. Rather than hindering innovation, the focus should be on educating investors about the risks of these new digital tools. Your sincerly, Daniel Alves