Oct. 15, 2023
Thank you for the opportunity to provide feedback. I wanted to raise a concern that the scope of coverage in the proposed SEC rule amendments may be too broad, potentially deeming every person using a covered smart contract as an exchange subject to registration. Specifically, the definition of "exchange" in the rule could include distributed ledger technology and smart contract systems. While the intent is likely aimed at large platforms and intermediaries, the wording leaves open the interpretation that individuals transacting directly via smart contracts may fall under the definition of an exchange. This would impose exchange registration requirements on a potentially huge number of regular users simply interfacing with smart contracts to exchange digital assets in a peer-to-peer fashion. It may even deter adoption of regulated, compliant smart contracts by creating ambiguity around which users are implicated. I recommend the SEC narrow the exchange definition or add a de minimis threshold in the finalized rule. This would exclude smaller scale, non-custodial, purely peer-to-peer transactions via smart contracts between individuals. Registering every endpoint user of a smart contract as an exchange seems disproportionate and infeasible to enforce. The goal should be regulating intermediaries managing exchange-like platforms enabled by smart contract technology. However, the rule as currently written may have the unintended consequence of roping in a broad range of actors who should fall outside the scope of exchange registration requirements. A measured approach would better support innovation while still furthering the SEC's regulatory aims. I appreciate the SEC's efforts to adapt rules to new technologies like smart contracts. A narrowly tailored definition of exchange will provide needed clarity for developers and users of this technology. Thank you for considering this feedback. J.