Oct. 14, 2023
? Dear Sir/Madam As a concerned citizen and advocate for the cryptocurrency and digital asset community, I strongly oppose the proposal "Safeguarding Advisory Client Assets; Reopening of Comment Period" by the Securities and Exchange Commission (SEC). While I understand the importance of investor protections, I believe that the SEC's approach to regulating cryptocurrency and digital assets is an overreach that stifles innovation and hampers the growth of this emerging industry. First and foremost, it is crucial to recognize that cryptocurrencies and digital assets are fundamentally different from traditional securities. They operate on decentralized networks and offer unique features such as transparency, immutability, and programmability. Applying the same regulatory framework designed for traditional securities to these innovative technologies is not only impractical but also counterproductive. Furthermore, the SEC's proposal fails to consider the existing legal framework surrounding cryptocurrencies and digital assets. The SEC's jurisdiction should be limited to securities, as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934. However, many cryptocurrencies do not meet the criteria of a security and should not be subject to the same level of regulation. The SEC should respect the existing laws and regulations that govern this space and avoid overstepping its authority. Additionally, the SEC's proposal imposes unnecessary burdens on businesses and individuals operating in the cryptocurrency and digital asset industry. The proposed rule would require registered investment advisers to maintain custody of client assets with a qualified custodian, which may not be feasible for many small businesses and startups in the industry. This could create a significant barrier to entry and hinder competition and innovation. Moreover, the SEC's proposal fails to recognize the unique nature of digital assets and the challenges they present in terms of custody. Unlike traditional assets, digital assets can be stored in various ways, including self-custody through private keys or through third-party custodians. By mandating the use of qualified custodians, the SEC is disregarding the advancements in technology that allow for secure self-custody solutions. This one-size-fits-all approach is not suitable for the diverse range of digital assets and custody methods available. Furthermore, the SEC's proposal could have a chilling effect on the development of decentralized finance (DeFi) platforms and protocols. DeFi has emerged as a groundbreaking innovation that offers financial services without intermediaries, providing greater accessibility and inclusivity. However, the proposed rule would impose regulatory burdens on DeFi platforms that operate on decentralized networks, potentially stifling their growth and limiting the benefits they can bring to the financial system. It is important to note that the cryptocurrency and digital asset industry is already subject to regulation and oversight by various government agencies, including the Financial Crimes Enforcement Network (FinCEN) and the Internal Revenue Service (IRS). These agencies have implemented measures to address concerns such as money laundering, terrorist financing, and tax evasion. The SEC's proposal, therefore, represents a duplication of efforts and an unnecessary expansion of its regulatory authority. Instead of imposing burdensome regulations, the SEC should focus on fostering innovation and providing clarity in the regulatory landscape. The lack of regulatory clarity has been a major obstacle for businesses and investors in the cryptocurrency and digital asset space. By working collaboratively with industry stakeholders, the SEC can develop a regulatory framework that balances investor protection with the promotion of innovation and growth. In conclusion, I urge the SEC to reconsider its proposal "Safeguarding Advisory Client Assets; Reopening of Comment Period" and take into account the unique characteristics of cryptocurrencies and digital assets. The SEC should respect the existing legal framework, avoid overreach, and foster an environment that encourages innovation and growth in this emerging industry. By doing so, we can ensure that the United States remains at the forefront of technological advancements and maintains its position as a global leader in the cryptocurrency and digital asset space. Thank you for considering my comments. Sincerely, Matthew Emmerson Sent from my iPad