Oct. 29, 2023
Dear Sir/Madam, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). While I appreciate the aim of enhancing investor protections and addressing gaps in the existing custody rule, I believe that the SEC's lack of industry expertise in the drafting of this proposal is evident, particularly in regards to digital assets and cryptocurrency. Digital assets, such as cryptocurrency, have emerged as a transformative force in the financial industry. These assets, built on blockchain technology, offer new opportunities for investment and financial innovation. However, the unique characteristics of these assets present regulatory challenges that require a deep understanding of blockchain technology and the dynamics of the digital asset ecosystem. Unfortunately, the proposed rule falls short in addressing the complexities of safeguarding digital assets. The SEC's limited expertise in this area is apparent, as the rule fails to provide clear guidance on how investment advisers can effectively safeguard client assets in the digital asset space. It is crucial for the SEC to collaborate with industry experts and stakeholders to ensure that the proposed rule adequately safeguards client assets without stifling innovation. Additionally, the proposed rule does not sufficiently account for the rapidly evolving nature of the digital asset industry. The dynamic nature of this industry requires regulations that are agile, adaptable, and grounded in a deep understanding of the underlying technology and market dynamics. Without this understanding, there is a risk that the proposed rule may quickly become outdated or incompatible with the rapidly changing digital asset landscape. Furthermore, the proposed rule's requirements for demonstrating exclusive control over digital assets lack nuance and fail to account for the distributed nature of blockchain networks. In the realm of digital assets, achieving exclusive control may not align with the decentralized nature of blockchain technology. Imposing inflexible requirements without considering these unique characteristics could hinder the ability of investment advisers to properly custody digital assets on behalf of clients. Given the significant impact that the proposed rule could have on the digital asset industry, it is crucial that the SEC solicits input from industry experts, technologists, and market participants who can provide valuable insights and perspectives. By engaging with these stakeholders, the SEC can ensure that any regulatory framework strikes the right balance between investor protection and fostering innovation in the digital asset space. In conclusion, I urge the SEC to reconsider the proposed rule in its current form, particularly in light of the agency's lack of industry expertise in digital assets and cryptocurrency. The inclusion of industry experts and stakeholders in the rule-making process will enable the SEC to establish a comprehensive regulatory framework that protects investors while fostering innovation and growth in the digital asset industry. Thank you for considering my concerns. I look forward to the SEC's careful review and consideration of the issues raised by various stakeholders that will aid in the formulation of a well-informed and effective rule. Sincerely, Crypto fan Sent with Proton Mail secure email.