Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing in response to the proposed rule "Safeguarding Advisory Client Assets," specifically addressing the concerns and issues relating to the potential negative impact on token utility. As an avid supporter of digital assets, particularly cryptocurrencies built on blockchain technology, I am deeply concerned that the proposed rules may limit the ability of tokens to function as utility tokens, hindering their intended use cases. Digital assets, such as cryptocurrency, have been transforming the finance industry by offering decentralized and innovative solutions. These assets hold tremendous potential to revolutionize various sectors, including banking, payments, and supply chain management. However, their growth and adoption heavily depend on a clear and supportive regulatory framework. While I understand the need for investor protections and effective custody of client assets, it is crucial to strike a balance that allows digital assets to thrive and provide their intended value. Imposing stringent custody requirements on these assets may stifle innovation and hinder their utility functions. Moreover, the proposed rules do not adequately address the unique characteristics of digital assets and the challenges faced in securing and storing them. Digital assets often require alternative custodial arrangements due to their decentralized nature. Many token-based projects utilize smart contracts and multisig wallets that provide efficient and secure means of asset custody. By design, these decentralized solutions eliminate the need for traditional third-party custodians, which may impose unnecessary costs and complexities. Furthermore, the proposed rules fail to acknowledge the rapid evolution of digital asset custody services. The emergence of regulated custodians specializing in digital asset custody has significantly enhanced security measures. These custodians adhere to strict operational and security standards, providing robust safeguards for client assets. Imposing burdensome requirements could deter collaboration between traditional custodians and digital asset-focused institutions, stifling the growth and development of this nascent industry. It is essential to foster an environment that encourages innovation and entrepreneurial endeavors in the digital asset space. Restrictive custody requirements may lead to a chilling effect on investment and talent in this rapidly evolving industry, depriving society of the potential benefits and advancements that digital assets offer. To ensure the effective regulation of digital assets, it is crucial for the Securities and Exchange Commission to engage in open dialogue and collaborate with the industry. By actively seeking input from industry participants, regulators can gain valuable insights into the unique challenges surrounding digital asset custody. Additionally, partnership with relevant stakeholders will facilitate the crafting of rules that strike an appropriate balance between investor protection and the promotion of token utility. In conclusion, I urge the Securities and Exchange Commission to carefully consider the potential negative impact of the proposed rules on digital assets' utility functions. A one-size-fits-all approach may hinder the growth and development of this transformative industry. By embracing innovation and engaging in industry dialogue, regulators can create a regulatory framework that fosters investor protection while unlocking the full potential of digital assets. Thank you for considering my concerns and for your commitment to robust and forward-thinking regulation. Sincerely, Luis Orlando Sánchez Enviado desde mi iPhone