Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing in response to the proposed rule "Safeguarding Advisory Client Assets" and would like to provide my comments and concerns regarding the rule's impact on digital assets or cryptocurrencies. Digital assets, such as cryptocurrencies, have emerged as transformative tools within the financial industry. As an investor in digital assets, I believe the proposed rules fail to adequately consider the unique properties of cryptocurrencies and their decentralized nature, leading to potentially impractical regulatory requirements. Cryptocurrencies operate on decentralized networks like blockchain technology, which inherently differ from traditional centralized financial systems. The proposed rules should take into account the technological complexities of cryptocurrencies before imposing regulatory burdens that may stifle innovation and hinder investor access to these promising assets. The Securities and Exchange Commission has recognized the potential risks associated with cryptocurrencies, but it is crucial that any regulatory measures are carefully crafted to strike a balance between investor protection and fostering innovation. While it is important to prevent fraud and safeguard investor assets, overly burdensome regulations may hinder the growth and development of this innovative industry. Rather than imposing comprehensive custody requirements that may not align with the decentralized nature of cryptocurrencies, a more nuanced approach that considers the unique challenges and risks associated with digital assets would be beneficial. This approach could allow for tailor-made regulatory measures that protect investors without stifling market growth. Additionally, the proposed amendments to the current custody rule might create difficulties in demonstrating exclusive control over these digital assets. Cryptocurrencies often require multiple key signatures, decentralized storage, or smart contract functionality. Imposing traditional custody obligations on digital assets may prove challenging due to these technological nuances. To ensure investor protection and provide adequate regulatory oversight, it may be more appropriate for the Securities and Exchange Commission to work closely with industry stakeholders to develop voluntary guidelines or industry best practices for the custody of digital assets. This collaborative approach would promote self-regulation, enable technological innovation, and allow for flexibility to address the unique nature of cryptocurrencies. In conclusion, I strongly urge the Securities and Exchange Commission to reevaluate the proposed rules regarding the safeguarding of client assets in the context of digital assets. It is crucial to strike a balance between investor protection and fostering innovation, ensuring that the regulatory framework supporting the cryptocurrency industry considers the unique properties and challenges associated with these assets. By incorporating industry expertise, the Securities and Exchange Commission can develop robust guidelines that maximize investor protection without stifling the immense potential of digital assets. Thank you for considering my comments. Sincerely, David Meriwether