Oct. 18, 2023
As a concerned citizen, I strongly oppose the proposed legislation by the SEC regarding the safeguarding of advisory client assets in the context of cryptocurrency and digital assets. While I understand the need for regulatory oversight in this rapidly evolving industry, I believe that the SEC's approach in this case represents an overreach that could stifle innovation and hinder the growth of the digital asset market. First and foremost, it is important to recognize that existing laws already provide a framework for the protection of client assets. The Investment Advisers Act of 1940, for example, requires investment advisers to act as fiduciaries and to act in the best interests of their clients. This includes taking reasonable steps to safeguard client assets. By extending these regulations to specifically target cryptocurrency and digital assets, the SEC is essentially duplicating existing laws and creating unnecessary burdens for market participants. Furthermore, the SEC's proposal fails to consider the unique characteristics of cryptocurrency and digital assets. Unlike traditional financial instruments, these assets are decentralized and often held in digital wallets that are controlled by individual investors. The proposal's requirement for investment advisers to maintain physical possession or control of client assets is impractical and ignores the fundamental nature of these assets. It would force investors to rely on third-party custodians, introducing security risks and corruption seen only recently in the industry.