Oct. 23, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address the gaps in the custody rule, I believe that there are several areas where the proposal falls short and requires further consideration and revision. Specifically, I would like to address the lack of industry expertise in drafting the proposal and its impact on the regulation of digital assets and cryptocurrency. It is evident that the SEC does not have sufficient expertise in digital assets and cryptocurrency, leading to a lack of understanding of the industry's unique characteristics. As digital assets, particularly cryptocurrencies, continue to gain prominence and transform the financial landscape, it is crucial that their regulation is approached with a nuanced understanding and expertise. However, the proposed rule fails to adequately address the complexities of digital assets, potentially stifling innovation and growth in this promising sector. Digital assets, such as cryptocurrency, are built on blockchain technology, which enables decentralized and transparent financial transactions. They offer benefits such as faster and cheaper cross-border transactions, increased financial inclusion, and improved security. However, due to the inherent nature of digital assets, their regulatory landscape is relatively new and constantly evolving. One of the key challenges with regulating digital assets is the lack of uniformity and divergent approaches taken by different jurisdictions. The SEC's proposal should take into account the need for harmonization and international cooperation in regulating digital assets, to avoid regulatory arbitrage and provide clarity for businesses operating in this space. Furthermore, the proposal should recognize the importance of fostering innovation and allowing for experimentation in the digital asset industry. Given the transformative potential of digital assets and blockchain technology, it is crucial to strike a balance between regulation and innovation. Restrictive or burdensome regulations may deter companies from operating in this space, limiting their ability to deliver innovations that can benefit investors and the broader economy. Additionally, the proposed rule should consider the unique characteristics of custody and safeguarding of digital assets. Traditional custody solutions may not be directly applicable to digital assets, given their decentralized nature and the use of private keys to authenticate transactions. The SEC should work collaboratively with industry participants and experts to develop practical and effective safeguarding measures that address the distinct challenges posed by digital assets while ensuring investor protection. In conclusion, the lack of industry expertise in drafting the proposed rule on safeguarding advisory client assets raises concerns about its ability to effectively regulate digital assets and cryptocurrency. It is essential that regulators engage with industry experts to gain a comprehensive understanding of the unique characteristics and challenges of this emerging field. I urge the SEC to take these concerns into consideration and engage in a more thorough consultation process with industry participants and experts to develop rules that strike a balance between investor protection and fostering innovation in the digital asset industry. By doing so, the SEC can play a pivotal role in creating a regulatory environment that encourages responsible growth and development in this transformative sector. Thank you for considering my comments. I look forward to further discussions on this crucial matter. Sincerely, F. Rebours