Subject: S7-04-23: Webform Comments from Anonymous
From: Anonymous
Affiliation:

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