Apr. 23, 2023
April 23, 2023 I am an individual investor in blockchain software and cryptocurrencies. This proposed rule, as amended, would harm me personally and harm innovation in America. Part of the SEC's mission is to support innovation and the development of capital markets. The current SEC is openly hostile towards crypto because this technology disintermediates finance. What the SEC fails to see is that this innovation -- decentralized or disintermediated finance -- is a good thing for the economy and the development of financial markets. The high-profile crypto scandals and frauds of 2022 were not the result of decentralized finance protocols but rather traditional, centralized intermediaries operating in crypto assets. DeFi protocols didn't miss a beat during the insane events and volatility of 2022. The SEC should be regulating traditional financial intermediaries who provide on/off ramp services to crypto protocols (e.g., Coinbase and Gemini) but not the protocols themselves, which are software rath er than human-controlled intermediaries of the traditional sort. This situation is like a regulator in 1994 saying that only traditional paper mail is allowed since it is intermediated by the U.S. Postal Service and that e-mail is banned unless it is provided by the U.S. Postal Service and can conform to its norms. How ridiculous does that seem today? And yet here we are with the SEC taking this position on DeFi. The SEC has no authority to regulate \"communications protocols.\" Where did this come from? Congress? Or the SEC itself? The SEC cannot grant itself additional authorities without explicit Congressional authorization. The SEC does not have the authority to regulate software in the form of DeFi protocols. While not mentioned in the proposed rule, it appears that the SEC wants to block innovation to protect its own ability to control the way that finance is done in America. The SEC should not be self-serving its own power but rather serving the citizens of this country and t he public interest. One last comment is that, unlike traditional finance, DeFi protocols are transparent and auditable, so the regulators should be welcoming this benefit rather than driving the technology and the entrepreneurs creating it to offshore locations.