Oct. 24, 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 efforts to enhance investor protections and address gaps in the custody rule, I have concerns regarding the potential negative impact on investor access to digital assets, specifically cryptocurrencies. Digital assets, such as cryptocurrencies, have revolutionized the financial industry with their ability to provide decentralized and borderless transactions. These assets have gained significant popularity among retail investors, offering them a new way to diversify their portfolios and participate in the emerging digital economy. However, the proposed rule may restrict investor access to digital assets, limiting their ability to participate in this transformative asset class. By expanding the coverage of the rule to include a broader range of investments held in a client's account, there is a risk of stifling innovation and dampening the growth of this promising sector. Digital assets are unique in nature, and their custodial requirements differ from traditional assets. Crypto assets are typically stored in digital wallets, and the concept of exclusive control may differ from the traditional notion of custody. Imposing stringent custody and asset segregation requirements on digital assets may hinder the ability of investment advisers to effectively manage these assets on behalf of their clients. Additionally, the proposed rule may create a chilling effect on the custodianship of digital assets. The uncertainty surrounding regulatory requirements for custody in this space could lead to a decrease in qualified custodians willing to offer their services for digital assets. This restriction in custodial options will ultimately limit investors' ability to access and safeguard their digital assets through reputable and regulated custodians. It is imperative that the SEC takes a balanced approach towards safeguarding client assets while also encouraging innovation and competition in the digital asset space. Rather than imposing overly burdensome requirements, the SEC should work towards providing appropriate guidance and regulatory clarity to foster the growth of this important asset class. I also urge the SEC to consider the potential unintended consequences of the proposed rule on the broader digital asset ecosystem. Any regulatory actions should take into account the unique characteristics and challenges associated with digital assets, and be mindful of facilitating responsible innovation and investor protection. In conclusion, I believe that the proposed rule should be revised to address the specific custodial requirements of digital assets and ensure that investor access to this transformative asset class is not unduly restricted. By taking a flexible and innovation-friendly approach, the SEC can effectively balance investor protection with the encouragement of responsible digital asset investment. Thank you for considering my comments. Sincerely, Warren