Oct. 24, 2023
Dear Securities and Exchange Commission, I am writing in response to the proposed rule "Safeguarding Advisory Client Assets," and I would like to express my concerns regarding the inadequate consideration of the unique properties of cryptocurrency. While the rule aims to enhance investor protections and address gaps in the custody rule, it fails to acknowledge the decentralized nature and technological complexities of cryptocurrency, leading to impractical regulatory requirements. Cryptocurrency, including digital assets built on blockchain technology, is transforming the landscape of finance. It offers new possibilities for investors, providing increased accessibility, transparency, and security. However, regulatory uncertainties surrounding cryptocurrency pose challenges for both market participants and regulators. The proposed rule should carefully consider the unique features and risks associated with cryptocurrency. Despite its growing popularity, the SEC has not provided clear guidelines for investment advisers on safeguarding client assets that include digital assets. Existing regulations are ill-suited to the decentralized nature of cryptocurrency, resulting in impractical and burdensome requirements. By failing to account for the distinct characteristics of digital assets, the proposed rule risks stifling innovation and growth in the cryptocurrency space. It is essential that regulators develop a comprehensive understanding of blockchain technology and its implications for investor protection. Therefore, I urge the SEC to: 1. Collaborate with industry experts: The SEC should engage in meaningful dialogue with cryptocurrency experts, blockchain developers, and market participants to gain a deeper understanding of the technology and its potential risks. 2. Develop clear guidelines: The SEC needs to provide clear guidelines for investment advisers to properly safeguard cryptocurrency assets. These guidelines should take into account the decentralized nature of the technology, while still emphasizing investor protections. 3. Encourage self-regulation: Rather than imposing rigid and prescriptive rules, the SEC should encourage self-regulatory initiatives within the cryptocurrency industry. This approach would allow for flexibility and innovation, while still maintaining high standards of investor protection. 4. Overcome regulatory uncertainty: Uncertainty surrounding the regulatory status of cryptocurrencies hinders institutional adoption and mainstream acceptance. The SEC should work towards providing regulatory clarity, which will help foster a more transparent and secure environment for investors. It is crucial that regulators adapt to the evolving landscape of finance and address the unique challenges posed by digital assets. Failure to do so may hamper the development of the cryptocurrency industry, dampen innovation, and potentially deprive investors of the benefits associated with this transformative technology. Thank you for considering my concerns regarding the proposed rule. I hope that the SEC takes these points into consideration and strives to strike a balance between investor protection and fostering innovation in the cryptocurrency space. Sincerely, Alex Medal ILICH MEDAL ORTEGA