Oct. 29, 2023
I am writing to provide my public comment on the proposed rule, "Safeguarding Advisory Client Assets" put forth by the Securities and Exchange Commission (SEC). I appreciate the opportunity to offer my perspectives and concerns related to this important rule proposal. I. Introduction The proposed rule intends to address the safeguarding of client assets by investment advisers, with the goal of enhancing investor protections and addressing existing gaps in the custody rule. While I support the objective of strengthening safeguards for client assets, I would like to draw attention to a critical issue that needs further consideration. II. Discussion A. Lack of Consideration for Cross-Border Transactions In reviewing the proposed rule, it is evident that there is a lack of sufficient consideration for cross-border transactions involving digital assets. As the market for digital assets continues to grow and evolve, it is crucial to recognize the unique challenges and complexities associated with cross-border transactions. Failure to adequately address these challenges can lead to compliance difficulties and potential regulatory gaps. The proposal appears to take a predominantly domestic perspective, overlooking the global nature of the digital asset market. The lack of clear guidance and frameworks for cross-border transactions imposes undue burdens on investment advisers engaged in international activities. This can hinder the growth and innovation of the digital asset industry while also creating uncertainties for investors. It is imperative that the SEC acknowledges and addresses these challenges within the proposed rule to ensure regulatory clarity and coherence in cross-border transactions involving digital assets. A comprehensive framework that accounts for jurisdictional complexities, regulatory cooperation, and coordinated approaches across international markets is necessary to prevent regulatory arbitrage and protect investors in both domestic and global contexts. III. Economic Analysis While recognizing the SEC's commitment to evaluate the economic impact of proposed rule amendments, I urge the Commission to consider the potential ramifications of overlooking the concerns raised about cross-border transactions involving digital assets. A. Global Market Manipulation is a Possibility The international nature of digital assets presents unique opportunities for global market manipulation. Without comprehensive regulations and frameworks explicitly addressing cross-border challenges, there is an increased risk of market manipulation schemes transcending international boundaries. These malicious activities can adversely impact investor confidence and market stability, potentially causing severe economic repercussions. The economic analysis should, therefore, include an evaluation of the risks associated with inadequate regulatory measures to combat global market manipulation in the digital asset space. Robust safeguards and cross-border cooperation are essential to mitigate these risks and protect investors, ensuring fair and efficient markets. IV. Solicitation of Comments I appreciate the SEC's efforts in soliciting public comments on the proposal's economic analysis, benefits, costs, efficiency, competition, capital formation effects, and reasonable alternatives. It is crucial to include viewpoints from a diverse range of stakeholders to ensure a well-informed and balanced decision-making process. In addition to my concerns outlined above, I invite the SEC to consider other potential risks or overlooked benefits and costs associated with the proposed rule. The participation of market participants and experts from various sectors is critical in shaping effective policies and minimizing unintended consequences. V. Conclusion As a concerned market participant, I urge the Securities and Exchange Commission to thoroughly consider the challenges arising from cross-border transactions involving digital assets. Failing to address these challenges adequately could undermine the objectives of the proposed rule and hinder the growth and stability of the digital asset market. I appreciate the Commission's commitment to investor protection and encourage the SEC to engage with international counterparts to establish a harmonious and globally coordinated framework for regulatory oversight. Thank you for considering my public comment. I trust that the SEC will carefully evaluate all the concerns raised in the public responses and ultimately implement a rule that fosters innovation, maintains market integrity, and enhances investor protections.