Oct. 28, 2023
Dear Securities and Exchange Commission, I, A Concerned U.S. Citizen, am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). While I understand the importance of investor protection and the need for comprehensive regulations, I believe this proposal may place undue burdens on small businesses and startups operating in the emerging field of digital assets, particularly cryptocurrencies. The proposed rule recognizes the challenges posed by digital assets and aims to address them. However, it is important to consider the potential impact of these regulations on innovation and growth in the digital asset industry. With the rapid advancements in technology, digital assets have emerged as a transformative force in finance, built on the foundations of blockchain technology. These assets offer new opportunities for investors and have the potential to revolutionize the financial landscape. Unfortunately, regulatory uncertainties surrounding digital assets have hindered their wider adoption, inhibiting the growth of startups and small businesses operating in this space. The proposed rule, in its current form, seems to continue this trend by placing a disproportionate burden on these entities. Compliance with the proposed custodial requirements would impose significant costs and administrative burdens, potentially stifling the ability of small businesses and startups to innovate and compete. I urge the SEC to consider the unique characteristics of digital assets and provide regulatory flexibility that nurtures innovation while safeguarding investor interests. Striking the right balance between investor protection and industry growth is paramount. By fostering an environment that enables businesses to develop robust compliance frameworks without unduly burdening them, we can enhance safeguards for investors while nurturing innovation in the digital asset space. It is essential to acknowledge that digital assets, including cryptocurrencies, are evolving at a rapid pace. The dynamic and complex nature of these assets necessitates a nuanced approach to regulation. A blanket approach, as proposed by the SEC, may not suffice in capturing the realities of this rapidly advancing ecosystem. Instead, the SEC should consider engaging with industry stakeholders, including startups and small businesses, to understand the practical challenges they face in implementing custody measures and explore collaborative solutions that strike a balance between accountability and fostering innovation. Furthermore, I encourage the SEC to provide clearer guidance on the specific requirements for safeguarding digital assets, especially given the inherent differences in asset custody between traditional financial instruments and digital assets. A more comprehensive understanding of custody practices within the digital asset industry will enable the implementation of effective regulations that achieve the desired investor protections without impeding innovation. In conclusion, while the proposed rule on "Safeguarding Advisory Client Assets" demonstrates the SEC's commitment to protecting investors, it is crucial to consider the potential impact on small businesses and startups operating in the digital asset space. By offering more flexibility and engaging with industry stakeholders, the SEC can strike a balance between investor protection and fostering innovation. I sincerely hope that my concerns will be taken into consideration during the rulemaking process. Thank you for your attention to this matter. Sincerely, A Concerned U.S. Citizen