Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's effort to enhance investor protections and address gaps in the custody rule, I have several concerns and reservations regarding certain aspects of the proposed rule. Specifically, I find that the consideration of unique properties of cryptocurrencies and digital assets is inadequate, leading to impractical regulatory requirements. Digital assets, including cryptocurrencies, have emerged as transformative technologies in the financial industry. Blockchain technology, on which these assets are built, offers decentralized and secure platforms for peer-to-peer transactions and asset ownership. However, the SEC's proposed rule fails to account for the decentralized nature and technological complexities of digital assets, which can result in unintended consequences that may hinder innovation and market growth. One area of concern is the proposed rule's application to digital assets. While it is important to ensure the safeguarding of client assets, the rapid evolution and unique features of digital assets require a nuanced and adaptable regulatory approach. Regulatory uncertainties surrounding digital assets have led to a fragmented regulatory landscape, causing confusion for market participants and potential investors. The SEC's proposed rule should acknowledge and address these challenges by providing clear guidelines and flexibility for investment advisers dealing with digital assets. Imposing rigid custody requirements without considering the decentralized nature of digital assets may impose unnecessary burdens on investment advisers, hinder market growth, and limit investor access to innovative investment opportunities. Additionally, the proposed rule's requirement regarding the demonstration of exclusive control over digital assets raises practical challenges. The decentralized nature of blockchain technology often involves multiple keyholders for wallets and escrow services, making it difficult for one party to establish exclusive control as traditionally defined. As such, it is essential for the SEC to develop new, technology-informed definitions and standards that are aligned with the unique properties of digital assets, rather than applying traditional custodial requirements that may not be applicable or feasible. Furthermore, the proposed rule's emphasis on qualified custodians as the sole provider of custodial services disregards the potential benefits of new custodial models emerging in the digital asset space. The SEC should consider open dialogue and collaboration with industry stakeholders to identify and develop custodial solutions that meet the unique requirements of digital asset custody, while providing adequate investor protections. It is crucial that the SEC fosters innovation and creates a conducive regulatory environment for digital assets to flourish. Striking a balance between investor protection and market growth is essential, and the proposed rule should exhibit a nuanced understanding of the unique properties and technological complexities of digital assets. In conclusion, I urge the SEC to take into account the concerns and challenges associated with digital assets when finalizing the proposed rule. By providing clear guidelines, flexible approaches, and engaging in open dialogue with industry participants, the SEC can help foster an environment that supports innovation and investor protection in the fast-evolving digital asset space. Thank you for considering my comments. Sincerely, Sarah Gesendet mit der mobilen Mail App