Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to voice my concerns and provide a public comment on the proposed rule, "Safeguarding Advisory Client Assets," which aims to enhance investor protections and address gaps in the custody rule. While I appreciate the SEC's efforts to strengthen safeguards and improve transparency, there are several areas of the proposal that I believe require further consideration and revisions. First and foremost, I am concerned about the inadequate consideration of the unique properties of cryptocurrency. The proposed rule does not adequately account for the decentralized nature and technological complexities of digital assets, resulting in impractical and burdensome regulatory requirements. The SEC should strive to implement rules that are adaptable and proportionate to the unique characteristics of cryptocurrencies, taking into consideration the privacy concerns and technological limitations associated with these digital assets. Furthermore, I find the proposed regulations to be confusing and potentially counterproductive in certain areas. The reporting requirements for various participants in decentralized finance (DeFi) are overly broad, leading to the generation of multiple inconsistent reports for the same transaction. This not only creates confusion and inefficiencies, but also raises concerns about data integrity and the ability to accurately assess risks associated with DeFi transactions. It is crucial for the SEC to carefully consider the impact of these reporting requirements on the functionality and development of innovative financial technologies. In addition to the specific concerns mentioned above, I would also like to emphasize the need for clear and consistent definitions throughout the proposed rule. Ambiguities in the language used can create confusion and uncertainty for market participants, impeding their ability to comply with the regulations and hindering the overall efficacy of the rule. It is imperative that the SEC ensures clarity in the definitions provided to facilitate proper implementation and adherence by investment advisers. Moreover, I believe the economic analysis provided in the proposal generally lacks a comprehensive assessment of the costs and benefits associated with the rule. While the SEC acknowledges the challenges in estimating the economic effects, it is important to establish a more robust analysis that considers the potential impacts on market competition, capital formation, and small entities. Without a thorough economic analysis, it is difficult to evaluate the full implications of the proposed rule and make informed decisions about its implementation. Finally, I appreciate the SEC's inclusion of a transition period for advisers to comply with the new rule. However, I would encourage the SEC to provide further guidance and clarity on the compliance requirements and expectations during this period. Offering additional support and educational resources to investment advisers would ensure a smoother transition and facilitate a more efficient implementation of the new rule. In conclusion, I urge the SEC to carefully consider the concerns highlighted above and make necessary revisions to the proposed rule. It is essential to strike a balance between investor protections, regulatory compliance, and technological advancements to foster a vibrant and innovative financial industry. Thank you for considering my public comment on this matter. Sincerely, Nico Maurath