Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing as a concerned U.S. citizen regarding the proposal on "Safeguarding Advisory Client Assets". While I understand the important goal of enhancing investor protections and addressing gaps in the custody rule, I have some reservations and concerns about certain aspects of the proposed rule, particularly in regards to its potential negative impact on investor access to digital assets. Digital assets, including cryptocurrencies, have rapidly emerged as a transformative force in the financial industry, leveraging blockchain technology to revolutionize traditional methods of transactions, investments, and asset management. However, the regulatory landscape around digital assets is still nascent and evolving, presenting challenges and uncertainties for both regulators and market participants. I am concerned that the proposed rules may inadvertently restrict investor access to digital assets, limiting their ability to fully participate in this emerging asset class. While it is understandable that the SEC seeks to establish safeguards and ensure proper stewardship of client assets, it is crucial to strike a balance that fosters innovation and encourages a vibrant digital asset market, while addressing legitimate investor protection concerns. In formulating the proposed rule, I urge the SEC to take into consideration the unique aspects of digital assets and recognize that the existing custody rule may not be entirely suitable for this new class of assets. Imposing strict requirements for custody of digital assets without carefully considering their decentralized and non-custodial nature could stifle innovation and hinder investor participation. Furthermore, I recommend that the SEC incorporates flexibility and establishes clear guidelines on custody of digital assets, so as to accommodate the various methods of storage and management that have emerged. By providing a framework that allows for responsible custody practices, the SEC can strike a balance between safeguarding investor interests and fostering innovation in the digital asset space. Additionally, I encourage the SEC to consult with industry experts, market participants, and stakeholders to gain a comprehensive understanding of the regulatory challenges posed by digital assets. This collaborative approach will not only enable the SEC to develop more informed and effective rules but also demonstrate an openness to industry feedback and foster greater trust and confidence in the regulatory process. Furthermore, I suggest that the SEC considers leveraging existing regulatory mechanisms, such as self-regulatory organizations (SROs), to aid in the oversight of digital asset custodians. By working closely with industry stakeholders and SROs, the SEC can tap into the expertise and experience of those already involved in digital asset custodianship to develop a more nuanced understanding of the unique challenges and risk mitigation strategies associated with this asset class. In conclusion, I appreciate the SEC's efforts to enhance investor protections through the proposed rule on safeguarding advisory client assets. However, I urge the SEC to carefully consider the potential negative impact on investor access to digital assets and adopt a flexible and collaborative approach that recognizes the unique attributes of digital assets. By striking the right balance, the SEC can foster a robust regulatory environment that safeguards investor interests while allowing for continued innovation and participation in the ever-evolving digital asset landscape. Thank you for your attention to this important matter. Sincerely, A Concerned U.S. Citizen