Oct. 28, 2023
Dear Securities and Exchange Commission, I, A Concerned U.S. Citizen, am writing to share my thoughts and concerns regarding the proposal on safeguarding advisory client assets. While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe there are several areas that require further consideration and improvement. One significant concern I have is the insufficient cybersecurity requirements for custodians, particularly in the context of digital assets such as cryptocurrencies. As the proposal aims to expand coverage to a broader range of investments, it is crucial to acknowledge the unique risks posed by digital assets. The transformative nature of cryptocurrencies and their underlying blockchain technology demands a heightened level of security measures to protect against theft and fraud. While the proposal touches upon the application of the rule to crypto assets, it fails to impose stringent cybersecurity requirements that adequately address the specific characteristics and vulnerabilities of these assets. Given the increasing prevalence and value of digital assets, it is essential to establish robust cybersecurity standards for custodians to ensure the safeguarding of client assets. This includes guidelines for secure storage solutions, encryption standards, regular security audits, and incident response protocols. Moreover, the proposal should consider the evolving nature of the digital asset landscape, taking into account ongoing technological advancements and emerging cyber threats. By incorporating flexible provisions that can adapt to changing circumstances, the SEC can ensure that its regulations remain effective and relevant in the rapidly evolving digital asset ecosystem. Additionally, I would like to highlight the importance of addressing regulatory uncertainties surrounding digital assets. While the proposal acknowledges the challenges posed by digital assets, it falls short in providing clear guidance for investment advisers operating in this space. The lack of regulatory clarity only serves to hinder innovation and discourage responsible participation in this transformative technology. To effectively regulate digital assets, it is imperative that the SEC works collaboratively with industry participants to develop a comprehensive framework that balances investor protection with fostering innovation. By engaging in ongoing dialogue with market participants and considering the input of industry experts, the SEC can establish a regulatory environment that not only provides investor safeguards but also promotes the responsible and sustainable growth of the digital asset ecosystem. In conclusion, I urge the SEC to strengthen the cybersecurity requirements for custodians, particularly in relation to digital assets. By implementing rigorous and adaptive security measures, the SEC can enhance investor confidence and ensure the protection of client assets in an increasingly digital world. Furthermore, I encourage the SEC to address regulatory uncertainties surrounding digital assets by engaging with industry participants and working towards the development of a comprehensive regulatory framework. Thank you for considering my concerns, and I hope that my comments contribute to the robust and effective regulation of advisory client assets. Sincerely, A Concerned U.S. Citizen