Jan. 30, 2022
January 30, 2022
From Michael D McCubbin
TO: SEC , Representative Hartzler, Senator Blunt, Senator Hawley,
Subject: Request for extension of Review for “PUBLIC comments”
REF: 17 CFR PARTS 232,240,242,249
{Release No. 34-940062; File No, S7-02-22}
RIN 3235-AM45
Hello, and I hope this letter finds you in good health.
I would like for the SEC to reconsider the Public Opinion time for the above changes, 30 days is not enough time to garner opinion when the SEC is attempting to propose changes to who and how they govern. As we all know technology has advanced at a fast pace, however the SEC saw this coming in 1997. I propose the SEC extend public comment to 180 days as this is a drastic change to how the SEC operates and how they will regulate.
First, the document is 654 pages long. This is not adequate time for a normal person who works, to find out about, digest, read, and then formulate opinion for comment in 30 days is absurd. As stated in the document this is from a proposal in September 2020 and is in relation to the formation of a Category ATS (alternative trading systems). Two years later a major change is proposed, and the public only allowed 30 days comment. Apparently, this is an attempt by this agency to push through this proposal.
To compare Apples to Apples, Chairman Levitt who served the Commission in 1997, asked for public comments on a concept release that was only 230 pages (release 34-38672) on May 23,1997 and asked for public comments to be in by October 3, 1997. As this is NOT a concept release and essentially a “rule change” public comment should be allowed as long or longer. This is pertinent to this situation since the concept release in 1997 was the way technology changes and how or when the SEC regulates markets. This was conceptualized by a chairman who served for8 years and was the longest standing Chairman of the SEC and foresaw technology advancing and that some changes need to be made. The term ATS was a result of this in 1998.
Decentralized Exchanges (DEX), Automated Market Makers (AMM), Centralized Exchanges (CEX), are this future whether we like it or not. The SEC is essentially trying to use the “old school” mentality of the stock market and apply it to this technology by changing the verbiage to who they regulate to comply. The truth is that many of the forms and submissions and proof are essentially either written in a smart contract or can be verified with the blockchain. By having this technology most of the SEC compliance with regulations can essentially be written into code or at a Centralized Exchange.
20 years in the military taught me many things, first and foremost don’t bring a complaint without a viable solution. Something many people have forgotten about. I am asking to extend the review process for a 180-day period. Also, during this period, I ask that congress review and propose a NEW entity to regulate this newer technology that is advancing rapidly. I am always for less agencies and regulations, however the SEC, CFTC, OCC, Treasury Department, and the Federal Reserve all combined have had their time to plan and make way for this technology and currently have not the technical knowledge or foresight to see how far this new technology could spread. The new agency would have a very distinct job of sorting and classifying who was what, are you a Security, a commodity, a business, a bank. This NEW entity would be the launch place for any and all new technology, a clearinghouse to say, It should have people who are versed in coding, blockchain technology, business, and some from the SEC, and CFTC and OCC. As this technology is borderless, the basics of business should apply, and I foresee that eventually this agency would combine and replace the SEC and CFTC as it grows.
ISSUES OF CONCERN: specific to NEW rule change.
The SEC is proposing to change the verbiage of who they can regulate without stating the requirements.
The Commodity Exchange Act CEA has determined that currencies such as Bitcoin BTC have been determined to be commodities. (Reference CFTC website) The CFTC is recognized as the primary Federal regulator of virtual currency markets. The CFTC is regulator of virtual currency, and the SEC is proposing to regulate the markets that trade the currency. Interagency crossover, redundancy and when two agencies try to do the same job, both fails.
The SEC has been asked by the Congressional banking Committee as to what classifies as a Security in relation to blockchain technology and has not been answered.
The SEC has current litigation over a blockchain technology that it says is a security and is currently at the supreme court.
The SEC is attempting to change the rules for what it classifies as a security with this new order with only 30 day review.
The proposed amendment to definition of exchange is preceding the clarification of what the commission considers a security. JUST ONE EXAMPLE OF HOW THIS GETS COMPLICATED QUICKLY.
Is a NFT/FT a security or a good? The reasoning behind this is where the commission needs the feedback from experts and users in the field. Example: The SEC considers a NFT and FT a security, a DISCORD (communication protocol) community forms a DAO (Decentralized Autonomous Organization) for the purpose of promoting a blockchain game, the community rewards people on the platform by using the channel, posts, artwork, articles with inhouse rewards that can be used to purchase a NFT (security? Good?). All these innovations are currently taking place and I cannot see the SEC effectively regulating and ensuring that the consumers are protected under an antiquated framework and ideology. Technically I guess a DISCORD channel could be considered an organization. So, if like-minded users on the channel facilitate a swap, then this could also then be considered an exchange by the SEC verbiage. BTW a DAO is self regulating.
It took me 3 hours to decipher digest and understand, At the time of this writing I am on page 15 of 654in this document.
For your consideration,
Michael McCubbin