Oct. 27, 2023
Subject: File No. S7-04-23 Dear Secretary Countryman, I am writing to express my concerns about the proposed rule on safeguarding advisory client assets (File No. S7-04-23). I am an individual investor and a user of cryptocurrency assets. I appreciate the SEC's efforts to protect the assets of advisory clients and enhance the safeguards for investors. However, I believe that the proposed rule would have negative consequences for advisors and clients who use or want to use non-traditional assets, such as cryptocurrencies. The proposed rule would limit the flexibility and competitiveness of advisors who want to take advantage of the audit provision, which exempts them from the annual verification requirement if their clients' assets are subject to an audit that meets certain requirements. The proposed rule would require advisors to choose a qualified custodian that can provide the necessary information for the audit, such as confirmations of balances and transactions. This would reduce the number of available qualified custodians and increase the costs for advisors. The proposed rule would also limit the management of non-traditional assets, such as cryptocurrencies, which may require specific verification procedures and expertise from auditors. This would make it more difficult and expensive for advisors to manage these types of assets, which may offer diversification and innovation benefits for clients. Moreover, I am worried about the phenomenon of regulatory overreach, which means the excessive interference of regulatory authorities in the cryptocurrency market. I think that this phenomenon could damage the competitiveness of the entire asset class of cryptocurrencies in the United States, hindering the innovation and growth of a rapidly evolving sector. The proposed rule, in fact, imposes too strict and burdensome requirements on advisors and qualified custodians who operate with cryptocurrencies, without considering the specificities and challenges of this type of asset. This could discourage advisors and clients from using or offering services related to cryptocurrencies, reducing the demand and supply of this market. Moreover, it could create barriers to entry for new actors and limit the diversity and quality of available services. On the contrary, other countries have adopted more flexible and favorable approaches to cryptocurrencies, recognizing their value and potential. For example, the United Kingdom has introduced a regulatory sandbox that allows operators to experiment with new products and services related to cryptocurrencies in a controlled and protected environment. Switzerland has created a special category of banking license for companies that operate with cryptocurrencies, simplifying the procedures and reducing the costs. Singapore has enacted a law that regulates operators of payment services based on cryptocurrencies, ensuring greater security and transparency for consumers. These countries have shown to be at the forefront of the cryptocurrency sector, attracting investments and talents, and fostering the development of an innovative and dynamic ecosystem. On the contrary, the United States risks losing its competitive edge at the global level, if it does not adapt its regulation to the needs and opportunities of the cryptocurrency market. Cryptocurrencies represent a unique and revolutionary asset class, that offers economic and social benefits for the United States. Cryptocurrencies can increase the efficiency and security of financial transactions, promote financial inclusion and democratization of access to capital, stimulate innovation and value creation in various sectors. For this reason, I ask the SEC to reconsider its proposal and adopt a more balanced and proportionate approach to regulating cryptocurrencies. Thank you for your attention and consideration of my comments.