Oct. 29, 2023
I’m writing to provide my public comment on the proposed rule, "Safeguarding Advisory Client Assets," published by the Securities and Exchange Commission (SEC). While I appreciate the aim of enhancing investor protections and addressing gaps in the custody rule, it is important to consider potential negative impacts the proposed rule may have on decentralized finance (DeFi) innovation, as well as concerns regarding privacy and data security. Firstly, I am concerned that the proposed rule's broad scope may unintentionally hinder the growth and development of decentralized finance projects. DeFi offers innovative financial services using blockchain technology, bringing greater financial inclusion to underserved communities and fostering peer-to-peer transactions without reliance on traditional intermediaries. By subjecting DeFi projects to the same regulatory requirements as traditional investment advisers, the SEC may hamper the vital innovation and potential of DeFi, hindering progress and limiting financial inclusion opportunities. Furthermore, the proposed rule may pose unnecessary burdens on investment advisers and qualified custodians. Compliance with multiple regulatory requirements risks diverting resources away from developing services that deliver value to clients and promoting economic growth. While safeguarding client assets should be of paramount importance, striking a reasonable balance between regulatory oversight and fostering a dynamic financial ecosystem is crucial. It is essential to ensure that the proposed rule does not stifle innovation and inadvertently hinder the evolution of financial services. Additionally, I am deeply concerned about the potential violation of privacy associated with the requirement to share sensitive financial data and social security numbers with multiple third-party custodians. The proposal's focus on expanded disclosure without due consideration for robust privacy safeguards raises valid concerns about the protection of individuals' sensitive personal information. The SEC should prioritize enhancing privacy protections within the proposed rule and ensure that the collection, storage, and transmission of personal data are carried out with the utmost security and respect for individual privacy rights. In light of these concerns, I urge the SEC to carefully assess the potential negative impact of the proposed rule on DeFi innovation. It is essential to strike a balance between regulatory oversight and encouraging innovation and financial inclusion. Furthermore, the SEC should consider implementing stronger privacy safeguards to protect the sensitive financial information of investors and clients. In conclusion, I believe that the proposed rule, as currently structured, may inadvertently hamper the potential growth and development of decentralized finance projects. It is essential for the SEC to consider the potential negative impact on innovation and financial inclusion. Additionally, privacy concerns must be addressed to safeguard the personal and financial information of investors and clients. I encourage the SEC to approach this rule-making process with a nuanced and thoughtful consideration of the issues at hand. Thank you for considering my public comment. I trust that you will give thorough and fair consideration to the concerns and suggestions outlined herein. I appreciate the opportunity to provide input and actively contribute to this important discussion.