Oct. 24, 2023
Dear SEC, I am writing to express my concerns and opposition to the proposed rule on "Safeguarding Advisory Client Assets" (Release Nos. IA-5407; IC-33923). While I appreciate the Securities and Exchange Commission's (SEC) aim to enhance investor protections and address gaps in the cystody rule, I find several issues with the proposed regulations that need to be addressed. One significant concern is the unequal treatment of different types of digital assets. I believe that the SEC's proposed rules treat these assets inconsistently, which could potentially lead to confusion and regulatory arbitrage. By failing to provide clear and consistent definitions for terms like "platform," "software," and "ledger," the proposed regulations leave room for ambiguous interpretations. Furthermore, the definitions provided for terms such as "wallet" and "validator" do not accurately reflect their technical meaning, adding to the confusion and potential misapplication of the rules. Moreover, I am concerned that the SEC has overreached in its regulatory framework concerning blockchain technology. It is crucial to recognize that blockchains are fundamentally speech, whereby users publish numbers in a public ledger or database. Decentralized exchanges, on the other hand, are websites that are not controlled by a single entity, and users publish numbers using their private keys that they "know" but do not necessarily own. By treating these exchanges as custodians and imposing onerous rules, the SEC risks stifling innovation and hindering the growth of a technology that has shown significant promise in terms of transparency and efficiency. Furthermore, the proposed regulations include undefined terms and fail to consider the technical nuances of the technology. Terms such as "platform," "software," and "ledger" are either left undefined or susceptible to multiple interpretations, which can lead to confusion and inconsistent application of the rules. It is essential for the SEC to engage in further research and consultation with relevant industry experts to ensure that the regulations reflect an accurate understanding of the technology they seek to regulate. Finally, I cannot support the SEC's proposed rules without acknowledging their potential impact on investors. The proposed regulations fail to adequately consider investments that do not fit within the traditional framework of the Howe Test. Assets such as Hex and Pulsechain, which are decentralized and immutable. should be treated differentlv from traditional assets that fall under the SEC's jurisdiction. Imposing the same rules and requirements on these assets could discourage innovation and deprive investors of unique and potentially promising investment opportunities and moving them overseas. In conclusion, I urge the SEC to reconsider the proposed rule on "Safeguarding Advisory Client Assets" and address the concerns raised. It is crucial to provide clear and consistent definitions of terms, taking into account the nuances of emerging technologies like blockchain. Additionally, I implore the SEC to recognize the potential of decentralized assets and develop a framework that supports innovation while still ensuring investor protections. By doing so, the SEC can strike a balance between regulation and fostering a vibrant and technologically advanced investment landscape. Thank you for considering my comments. If there are any additional areas of concern I can address or if you have any general questions regarding the proposal, please do not hesitate to reach out. Sincerely, Jose Rodriguez