Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" and its implications for the protection of digital assets, specifically cryptocurrency. While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe that the proposal lacks clarity on the necessary anti-fraud measures for digital assets. Digital assets, such as cryptocurrencies, have emerged as a transformative force in the financial industry, leveraging blockchain technology to provide decentralized and secure transactions. However, regulatory uncertainties surrounding these assets have created challenges for investors and market participants alike. It is crucial for the SEC to provide clear guidance on how investment advisers can effectively safeguard and protect these digital assets against fraudulent activities. In order to ensure the integrity of the investment advisory industry and protect investors' assets, it is imperative that the SEC establish comprehensive and robust anti-fraud measures for digital assets. These measures should encompass a range of safeguards, including but not limited to: 1. Due diligence requirements: Investment advisers should be required to conduct thorough due diligence on digital assets before holding them on behalf of clients. This should involve assessing their security features, underlying technology, and any potential vulnerabilities or risks. 1.Secure storage solutions: Investment advisers should be required to implement secure storage solutions for digital assets, such as cold storage or multi-signature wallets. These solutions should be designed to provide maximum protection against theft or unauthorized access. 1.Regular audits and examinations: In order to ensure compliance with anti-fraud measures, it is essential for the SEC to conduct regular audits and examinations of investment advisers' digital asset custody practices. This would help identify any weaknesses or deficiencies in their security protocols and allow for prompt remediation. Furthermore, the proposal should address the unique characteristics and challenges associated with digital assets. Unlike traditional financial assets, digital assets are often held outside of traditional custodial arrangements, which may necessitate alternative safeguards. Without clear guidance on how investment advisers should effectively safeguard these assets, there is an increased risk of fraud and mismanagement. I urge the SEC to take a proactive approach in regulating digital assets and providing comprehensive guidance for investment advisers. The lack of clarity in anti-fraud measures for digital assets under the proposed rule creates potential loopholes that could be exploited by fraudulent actors. It is crucial for the SEC to establish a level playing field that protects both investors and responsible industry participants. Thank you for considering my concerns regarding the proposed rule. I strongly believe that the SEC has a responsibility to safeguard investor assets and foster a secure environment for the digital asset market. I look forward to the SEC's continued efforts to address the challenges and risks posed by digital assets and ensure the integrity of our financial markets. Sincerely,Oliver