Oct. 28, 2023
Colin Huseman 27W724 Brookside Dr Winfield, IL 60190 10/28/2023 Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Attention: File No. S7-17-21 Subject: Public Comment - Safeguarding Advisory Client Assets Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets" (File No. S7-17-21). While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have concerns about certain aspects of the proposed rule, specifically regarding the inadequate consideration of self-custody solutions and the treatment of digital assets, such as cryptocurrency. With the increasing popularity and proliferation of digital assets, it is imperative for regulatory frameworks to adapt and take into account these innovative forms of currency. However, I find that the proposed rule falls short in adequately considering self-custody solutions, hindering the development of user-controlled asset management. The rule seems to primarily focus on traditional custodians and does not provide sufficient guidance or flexibility for investment advisers and their clients who choose to custody their own digital assets. Self-sovereignty, a fundamental principle underlying many digital assets, allows individuals to have full control and responsibility over their own assets, without the need for intermediaries. By not adequately considering self-custody solutions, the proposed rule may stifle innovation and limit the ability of investment advisers and clients to explore decentralized asset management options. Moreover, the treatment of digital assets or cryptocurrencies within the proposed rule is vague and ambiguous. Given the unique characteristics and challenges associated with digital assets, it is crucial for regulators to provide clear guidelines and requirements to ensure the safeguarding of these assets. This includes addressing issues related to exclusive control, proper custodial practices, and the verification of digital asset ownership. To mitigate these concerns, I urge the SEC to actively engage with the crypto industry, experts, and users to develop a comprehensive framework that addresses the complexities and implications of self-custody solutions. This could include establishing clear standards and best practices for custody of digital assets, conducting frequent audits, and promoting educational initiatives to raise awareness and ensure proper risk management. Furthermore, the SEC should consider leveraging emerging technologies, such as blockchain, for regulatory monitoring purposes. Blockchain-based solutions can provide transparent, tamper-proof records of custodial activities, enhancing security, accountability, and regulatory oversight. This approach aligns with the SEC's mission to protect investors and maintain fair and efficient markets, while promoting innovation in the financial industry. In closing, I appreciate the SEC's dedication to strengthening investor protections in the advisory industry. However, I believe that the proposed rule should incorporate a more balanced and nuanced approach towards self-custody solutions and digital assets. By fostering an environment that encourages innovation and provides clear guidelines, the SEC can effectively safeguard client assets within the evolving financial landscape. Thank you for considering my comments. I trust that the SEC will carefully evaluate all perspectives during the rule-making process and ensure that any final rule strikes the right balance between investor protection and encouraging innovation. Sincerely, Colin Huseman