Oct. 25, 2023
Dear Chairman Gensler and Members of the 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 about the potential negative impact of these proposed regulations on the decentralized finance (DeFi) ecosystem and the growth of digital assets, particularly cryptocurrencies. Firstly, the proposed rule's broad scope may unintentionally hinder the growth and development of DeFi projects, which have the potential to revolutionize the financial industry and provide financial inclusion to underserved communities. By expanding the coverage to include a broader range of investments held in a client's account, including digital assets, the SEC may inadvertently stifle innovation in this space. DeFi projects, built on blockchain technology, are transforming finance by enabling peer-to-peer transactions without intermediaries. Imposing stringent custodial requirements on these projects could significantly impede their operations, limiting opportunities for investors and stifling the potential financial inclusion benefits they offer. Additionally, the proposed rule's treatment of digital assets or cryptocurrencies raises concerns about regulatory uncertainties. The rapid growth and widespread adoption of digital assets have highlighted the need for clearer regulatory guidance. While the proposed rule addresses the application of the custody rule to digital assets, there remains a lack of clarity regarding aspects such as demonstrating exclusive control over crypto assets and custody requirements for crypto-native instruments. These uncertainties may deter investment advisers from engaging with digital assets, hindering the growth of this emerging asset class and the potential benefits it can provide to investors. While investor protection is of utmost importance, it is crucial to balance regulatory oversight with fostering innovation and ensuring a level playing field for participants in the financial markets. Imposing excessive regulatory burdens on DeFi projects and digital assets could hamper their ability to compete with traditional financial intermediaries, limiting investors' choices and potentially harming the overall development of the financial industry. I respectfully urge the SEC to consider these concerns and take a nuanced approach in the finalization of the proposed rule. This could involve engaging with industry participants and experts in the decentralized finance and digital asset space to better understand the unique characteristics and challenges associated with these emerging technologies. By providing clearer regulatory guidance, the SEC can foster innovation while still safeguarding investor interests. Thank you for considering my comments on the proposed rule. I believe that by carefully balancing regulatory concerns with the potential for innovation, the SEC can create an environment that facilitates the growth of decentralized finance and encourages responsible participation in the digital asset ecosystem. Sincerely, Tommy Ayala Sent from my iPhone