Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing in response to the proposed rule on "Safeguarding Advisory Client Assets" announced by the Securities and Exchange Commission (SEC). While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have concerns regarding the adequacy of consideration for the unique properties of cryptocurrency in the proposed rule. As an individual familiar with the decentralized nature and technological complexities of cryptocurrency, I believe that the regulatory requirements pertaining to digital assets need further refinement to ensure practicality and effectiveness. Digital assets, such as cryptocurrency, have introduced transformative possibilities in the realm of finance. However, these innovative technologies also come with their own set of challenges and considerations. Unfortunately, the SEC's current proposal fails to adequately take into account the decentralized nature and mathematical intricacies of cryptocurrency. This omission risks imposing impractical and burdensome regulatory requirements that fail to effectively safeguard investor assets. One particular concern I would like to highlight is the notion that math can be regulated. It is important for regulators to recognize that cryptocurrency is essentially a mathematical equation that cannot be regulated in the same manner as traditional assets. Attempting to do so would set a precedent that allows for unreasonable and arbitrary claims to be made. A regulation imposed on one particular address or fraction of a cryptocurrency has the potential to multiply into an infinite number of addresses corresponding to the same underlying value. Regulating this infinite number of addresses becomes practically unattainable and threatens the integrity of the regulatory framework as a whole. Moreover, the proposed rule should acknowledge the technological complexities found within the cryptocurrency ecosystem. Blockchain technology, the foundation of cryptocurrencies, is highly secure and resilient precisely because of its decentralized nature. By extending the proposed regulatory requirements in a manner that does not respect this decentralization, the SEC may inadvertently introduce vulnerabilities in the security and integrity of the digital assets it seeks to safeguard. To address these concerns, I encourage the SEC to engage in a more nuanced dialogue with industry experts, technologists, and stakeholders in the cryptocurrency space. By fostering greater collaboration, the SEC can develop regulations that strike an appropriate balance between investor protections and the unique requirements of digital assets. Working together, we can develop a regulatory framework that ensures the safety of client assets without stifling innovation or imposing undue burdens on market participants. In conclusion, I appreciate the SEC's commitment to enhancing investor protections through the proposed rule on "Safeguarding Advisory Client Assets." However, I am concerned about the implications of these regulatory requirements on the cryptocurrency ecosystem. It is important for the SEC to recognize the unique properties and complexities of digital assets such as cryptocurrency when crafting regulations. I kindly request that the SEC thoroughly evaluate and refine the proposed rule to better address the inherent decentralized nature and mathematical complexities of cryptocurrency. By doing so, the SEC can effectively enhance investor protections and promote the continuing growth and development of this innovative sector. Thank you for considering my comments. I urge the SEC to prioritize a comprehensive understanding of the unique properties of cryptocurrency to ensure appropriate and effective regulation of this emerging asset class. Should you require further information or wish to engage in additional dialogue regarding this matter, I would welcome the opportunity to expand on my comments. Sincerely, John Doe