Oct. 29, 2023
To those whom it concerns: I am writing today to express my concern regarding "Safeguarding Advisory Client Assets, Release No. IA–6240 (Feb. 15, 2023) (“Proposal”), which proposed a new rule under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”) which proposes regulation of U.S. cryptocurrency markets. I work in the educational system and have been interested in cryptocurrency for three years. During that time, I learned much about the differences between legacy and cryptocurrency markets including zero reserve assets. Knowing how much I had to learn to become proficient in cryptocurrency, I feel those who can enact laws that govern cryptocurrency must take due diligence to learn some of the critical and simple distinctions in the crypto markets. Firstly, there are significant differences between centralized and decentralized exchanges. Notably, centralized exchanges account for nearly all the losses in recent news, including Celsius and FTX among many. A key feature of centralized exchanges is that they hold users' funds, and the user must trust the entity to treat those funds like a bank. With decentralized exchanges, the user has self-custody of their cryptocurrency in their wallet with numerous levels of password protection. In the decentralized crypto market, the individual user is responsible for the safety and security of their crypto. Therefore, I encourage some regulation in the centralized exchange markets. Still, the same principle is counterproductive to the use and purpose of decentralization in which the user has complete control of their funds. Most of us who transact and build wealth in crypto understand the need to regulate certain aspects of the markets. Still, those regulations do not intuitively apply to central and decentralized exchanges. I am involved with numerous "communities" in crypto. I repeatedly hear about the misunderstanding between centralized and decentralized exchanges and the protections they offer the user. I believe the government can and should enact laws to help mitigate regulate centralized exchanges due to the unexpected failures and losses I have previously outlined. But the SEC should continue to gather facts before enacting lawn that will hurt the everyday investor. Another point I would like to make is that crypto-friendly states and governments will likely see incredible revenue increases related to crypto tax income over the coming decades. As the crypto community grows worldwide, the opportunity for government revenue is obvious. The user enters and exits the crypto markets through centralized platforms (such as Coinbase) to extract profits or incur losses reported in annual taxes. Those transactions are what I believe are critical to simplifying the cryptocurrency tax code in the U.S. Crypto taxes can be exceedingly tricky to understand. Still, as you may know, all transactions for every address are on the public blockchain, and those transactions are clear and transparent. Still, the current state of the crypto tax software, coupled with complicated laws and unnecessary tax regulations, makes it difficult for law-abiding citizens to ensure that taxes are correct. To simplify crypto taxes, I believe that using a flat tax system would be a simple method to help everyone in cryptocurrency while assisting regulators in the areas of the code necessary to protect centralized exchanges. Clarifying Bill "Safeguarding Advisory Client Assets, Release No. IA–6240 (Feb. 15, 2023) (“Proposal”), which proposed a new rule under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”) is not yet ready to be considered a crucial step in the right direction. The focus should also allow individual citizens to conduct their crypto business in decentralized exchanges where the user has 100% control over their security and funds. Again, as we all enter crypto from our U.S. banking accounts and then exit back to our U.S. banking accounts, I believe these are the clear taxable events that should occur rather than further complicating the tax codes, building safeguards to protect citizens who entrust their crypto to centralized exchanges while allowing citizens the right to conduct their business on decentralized exchanges without unnecessary burden for those of us who want to transact on the blockchain safely and legally. In sum, I feel strongly that clarification and separation of centralized and decentralization are urgently needed in "Safeguarding Advisory Client Assets, Release No. IA–6240 (Feb. 15, 2023) (“Proposal”), which proposed a new rule under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”). Thank you for your time in advance. I look forward to learning your thoughts on this critical legislation that will impact millions of Americans and many more in the coming years. Sincerely, Anonymous normal tax paying citizen