Subject: S7-04-23: Webform Comments from Anonymous
From: Anonymous
Affiliation:

Oct. 29, 2023

Dear Securities and Exchange Commission,

I am writing to provide my public comment on the proposed rule titled
"Safeguarding Advisory Client Assets." While I appreciate
the SEC's effort to enhance investor protections and address gaps
in the custody rule, I have some concerns regarding the lack of
industry expertise in drafting the proposal, particularly in relation
to digital assets and cryptocurrency.

Firstly, it is evident that the SEC does not possess sufficient
expertise in digital assets and cryptocurrency. The unique
characteristics of decentralized finance and the emerging world of
blockchain technology require a deep understanding that appears
lacking in the proposed rule. This is concerning as it may result in
unintended consequences and hinder innovation in the digital asset
industry.

One specific concern I have is the potential for increased market
manipulation in the decentralized finance space. Without an adequate
understanding of how these technologies function, regulating them in a
way that effectively prevents market manipulation will be challenging.
It is crucial that the SEC consults with industry experts and
stakeholders to gain insights into the intricacies of decentralized
finance. This will enable the development of rules that strike the
right balance between investor protection and allowing for innovation
and growth in this rapidly evolving sector.

Furthermore, the proposed rule should clarify how it applies to assets
such as cryptocurrencies and other digital assets that do not fit
neatly into traditional custodial models. These assets often utilize
decentralized methods of storage and transfer, rendering the
application of custody rules and requirements a complex task. It is
imperative that the SEC works closely with digital asset custodians
and experts to ensure the rules are clear and effective in
safeguarding client assets while accommodating the unique nature of
these assets.

In addition, the SEC should consider the impact of the proposed rule
on innovation and competition within the digital asset industry.
Striking the right balance between regulation and fostering a vibrant
and competitive market is crucial for long-term growth and the
protection of investors. The proposed rule should be carefully crafted
to avoid stifling innovation or creating undue burdens for small
businesses and startups in the digital asset space.

To address these concerns, I recommend that the SEC collaborate with
industry experts, consult widely with stakeholders in the digital
asset industry, and establish a dialogue with innovators and
entrepreneurs in decentralized finance. Seeking expertise and input
from those actively involved in the industry will ensure that the
proposed rule effectively addresses investor protection concerns
without impeding innovation or hindering the growth of this nascent
field.

In conclusion, while I appreciate the SEC's efforts to enhance
investor protections through the proposed "Safeguarding Advisory
Client Assets" rule, I urge the commission to consider the
significant lack of industry expertise in digital assets and
cryptocurrency. Adapting the rule to the unique characteristics of
decentralized finance, seeking expert input, and fostering innovation
will result in a more effective and well-rounded regulatory framework.

Thank you for considering my comments.