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.