Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concern regarding your consideration of applying SEC Rule S7-04-23 to decentralized cryptocurrencies. Although I appreciate your desire to protect the public, decentralized crypto currency does not fall under the same regulatory framework as traditional securitites and centralized exchanges. The lack of transparency and overstepping from the SEC has significantly hurt us more than it has helped us. Additionally, many crypto enthusiasts believe that blockchain technology (which powers most major cryptos) can serve as a robust platform for preserving free speech rights. Blockchain allows anyone with internet connectivity to interact freely with others via smart contracts, messaging apps, and peer-to-peer services—all without fear of retaliation or harassment. Its distributed architecture enables data to remain resilient against attempts to silence dissenting voices or suppress critical opinion. While some ICOs may involve the sale of securities, most tokens issued through ICOs serve as utility tokens providing users access to products or services rather than representing equity or ownership stakes in the company behind them. Therefore, different regulatory considerations apply to decentralized cryptocurrencies than those covered by SEC Rules such as S7-04-23, which are primarily designed to protect investors in conventional securities offerings. Furthermore, enforcing compliance with SEC Rule S7-04-23 could lead to inconsistencies between jurisdictions and potentially undermine efforts towards global harmonization of digital asset standards.It could also place smaller startups at a disadvantage relative to larger corporations with greater resources to devote to compliance activities.The lack of clarity for decentralized crypto currency is going to create unneccessary burdens and costs for developers and entrepeneurs seeking to innovate within this rapidly evolving industry. In addition, under the howey test with immutable decentralized cryptocurrency code there is no common enterprise, We are not investing in a corporation and we are not expecting profits based on the work of others. Rather than throw all of these into a bucket and say that they are securities and kill innovation I am requesting that you help with the following so that innovation can still happen and US can become a leader in this space. 1. Define Specific Criteria: To avoid vagueness and inconsistency, regulators ought to create detailed guidelines outlining which aspects of a token sale would render the underlying asset a security. They could build upon existing frameworks like the Howey test but expand and refine them according to contemporary realities. Such specificity will help promote predictability, minimize compliance costs, and enhance investor protection. 2. Promote Transparency: Lastly, authorities ought to promote transparency by sharing information about investigations, settlements, and judgements with appropriate parties promptly. Doing so would allow stakeholders to learn from past mistakes and adapt practices accordingly, ultimately contributing to the overall betterment of the ecosystem. 3. Encourage Innovation: Rather than stifling innovation, regulators should foster experimentation and facilitate responsible exploration in nascent areas.