Oct. 24, 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 gaps in the custody rule, I believe there are several issues that need to be addressed to ensure the rule's effectiveness and avoid unintended consequences. One particular area of concern is the inadequate consideration of the unique properties of cryptocurrency. The proposed rule does not sufficiently take into account the decentralized nature and technological complexities of cryptocurrency, leading to impractical regulatory requirements. Cryptocurrency operates on blockchain technology, which is designed to ensure security, transparency, and accuracy of transactions. However, the proposed rule fails to recognize these inherent features and instead imposes burdensome custodial obligations that are not well-suited for the digital asset realm. Furthermore, the impact of the proposed regulations abroad is another significant concern. The rule does not sufficiently limit reporting requirements for protocols run outside the United States and for users outside the United States. This lack of clarity and specificity in the rule creates ambiguity and raises questions about the cross-border implications. It is crucial to strike a balance between ensuring investor protections and avoiding undue burdens on global participants, especially given the borderless nature of cryptocurrencies. In considering the proposed rule, it is important to take into account the potential unintended consequences and costs associated with overregulation. While investor protection is paramount, an overly restrictive regulatory framework may stifle innovation and hinder the growth of the cryptocurrency industry. Finding the right balance between regulation and fostering entrepreneurial development is essential to achieve long-term success in this evolving landscape. Additionally, I would like to raise concerns regarding the economic analysis of the proposed rule. While I acknowledge the SEC's efforts to consider the costs and benefits, there needs to be a more comprehensive assessment of the economic effects, especially in relation to the unique nature of digital assets. The economic analysis should carefully consider the potential impact on competition, capital formation, and the overall efficiency of the markets. In conclusion, while I support the SEC's goal of enhancing investor protections and addressing gaps in existing rules, it is crucial to address the concerns raised above regarding the unique properties of cryptocurrency and the potential impact abroad. These concerns, along with a more robust economic analysis, will help ensure that the final rule strikes the right balance between safeguarding client assets and promoting innovation and global participation. Thank you for considering my comments. I urge the SEC to carefully evaluate the concerns raised and to make necessary adjustments to the proposed rule to ensure its effectiveness and avoid unintended consequences. Sincerely, Brian White