Oct. 19, 2023
Dear SEC, I am writing to express my concerns regarding the proposal for "Safeguarding Advisory Client Assets". While I acknowledge the importance of enhancing protections for investor assets and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule require further consideration and revision. One major concern pertains to the inadequate consideration of the unique properties of cryptocurrency. The SEC's approach fails to take into account the decentralized nature and technological complexities of cryptocurrency, which imposes impractical regulatory requirements. This one-size-fits-all approach is ill-suited for the rapidly evolving and dynamic crypto asset market. A more nuanced regulatory framework is necessary to address the specific challenges associated with safeguarding cryptocurrencies. Additionally, the proposed rule utilizes poorly defined terms, such as "platform," "software," and "ledger," which are susceptible to a multitude of interpretations. Furthermore, the definition of other terms, such as "wallet" and "validator," does not accurately describe their technical meaning. This lack of precision and clarity will invariably lead to confusion and potentially hinder compliance efforts, undermining the rule's intent to enhance safeguarding measures. Alongside these concerns, I would like to raise questions regarding the economic analysis conducted by the SEC. While the proposal acknowledges the challenge of estimating economic effects due to varying practices among investment advisers, there appears to be an inherent assumption that the benefits of the proposed rule outweigh the compliance costs incurred by advisers. However, it is crucial to assess the potential impact on advisory services, competition, and the efficient functioning of capital formation processes. Considering the potential unintended consequences of overly burdensome regulatory requirements is essential. Furthermore, the SEC should actively solicit comments on potential alternative approaches to address the safeguarding of client assets. Encouraging innovative solutions that strike a balance between investor protection and compliance costs will foster a more effective and adaptable regulatory environment. In conclusion, I urge the SEC to reconsider certain aspects of the proposed rule to address the specific challenges posed by cryptocurrency and strive for more precise definition of terms utilized. Additionally, I invite the SEC to conduct a comprehensive economic analysis that examines the potential impact on advisory services, competition, and capital formation. Lastly, I encourage the SEC to actively seek public input on alternative approaches that may better achieve the desired goals of investor protection. Thank you for considering my concerns and for providing the opportunity to offer this public comment. I appreciate your dedication to ensuring the integrity of our financial markets. Sincerely, Roy Griffin