Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I understand the intention behind this rule to enhance investor protections and address gaps in the custody rule, I believe there are certain aspects of the proposal that may have unintended negative consequences, particularly in the context of decentralized finance (DeFi) and digital assets. Firstly, I am concerned that the scope of the proposed rule could hinder the growth and development of DeFi projects. Decentralized finance has emerged as a revolutionary force in transforming the financial industry by enabling peer-to-peer transactions and eliminating intermediaries. However, the proposed rule's application to digital assets and crypto could stifle innovation and potential financial inclusion. It is crucial to strike a balance between regulating the market and allowing for continued innovation in this space. Furthermore, I would like to highlight the challenges posed by regulating digital assets. The cryptocurrency market operates on blockchain technology, which introduces unique nuances and complexities that traditional regulations may not adequately address. It is important to consider the dynamic nature of the digital asset market and craft regulations that encourage investor protection without stifling innovation. In addition, I have concerns about the burden that the proposed rule might place on small entities and startups operating in the digital asset space. The compliance costs associated with implementing the required safeguards and recordkeeping measures could disproportionately impact smaller players in the market, potentially stifling competition and hindering capital formation. It is imperative that the SEC carefully considers the potential impact of the proposed rule on small entities and seeks to minimize any disproportionate burdens. I would also like to raise the issue of regulatory uncertainties surrounding digital assets. The rapid pace of technological advancements and the evolving nature of the digital asset market make it challenging for regulators to keep up with the changing landscape. Instead of creating rigid rules that may quickly become outdated, I urge the SEC to adopt a flexible approach that allows for iterative regulation, which can adapt to the fast-paced nature of this industry. In conclusion, while the goal of enhancing investor protections is commendable, it is essential to carefully consider the potential negative impacts on decentralized finance and the digital asset market. The SEC must strike a balance between regulatory oversight and encouraging innovation in order to foster a thriving and inclusive financial ecosystem. I urge you to take these concerns into consideration and ensure that the final rule reflects a nuanced understanding of the challenges and opportunities presented by digital assets. Thank you for your attention to these matters. Sincerely, Mat De Cerff