Feb. 17, 2023
February 17, 2023 To the Staff: I am strongly supportive of the proposed amendments to the Custody Rule. They are an important step forward in ensuring adequate protection of investors in digital assets. I write to note that the drafting of the proposed definition of \"qualified custodian\" is unclear. It refers to \"(i) A bank as defined in section 202(a)(2) of the Advisers Act (15 U.S.C. 80b-2(a)(2)) or a savings association as defined in section 3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)) that has deposits insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. 1811)...\" What is unclear is whether the \"that has deposits insured by the FDIC\" clause modifies both \"a bank\" and \"a savings association\" or only \"a savings association.\" I believe the clause should modify both there is no reason to treat banks different than savings associations in this regard. If so, it would mean that this prong of the \"qualified custodian\" definition would require an insured depository institution of some type that actually takes insurable deposits. This distinction matters because the definition of \"bank\" in the Investment Advisors Act includes certain entities (namely trust companies) that do not have FDIC-insured deposits. The current drafting leaves it unclear whether they would be qualified custodians, and the press statements from some of these entities that currently act as custodians of digital assets indicates that they believe they qualify under the proposed drafting. Although I believe that they do not, clarification of the drafting would be desirable, either way. Sincerely, Adam Levitin