Oct. 30, 2023
Dear Secretary, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets" from the Securities and Exchange Commission (SEC) and offer my public comment on the matter. While I appreciate the intent behind the rule to enhance investor protections and address gaps in the custody rule, I believe that certain aspects of the proposal require further scrutiny and revision in order to ensure consistency, clarity, and fair treatment. One significant concern I have is the inconsistent regulatory treatment of utility tokens. The proposal fails to provide a clear and consistent framework for the regulation of utility tokens, leading to confusion and potential regulatory arbitrage. As digital assets, including cryptocurrencies, become increasingly important in the financial landscape, it is essential to establish regulatory certainty and level the playing field for market participants. By omitting a comprehensive approach to utility tokens, the proposed rule creates uncertainty and could hinder innovation in this rapidly evolving space. Moreover, the regulation of digital assets or cryptocurrencies presents unique challenges due to their decentralized nature and the underlying blockchain technology. While it is crucial to safeguard client assets, the proposal does not adequately address the specific considerations associated with digital assets. It is essential to strike a balance between investor protection and the promotion of technological advancements. Regulators should work with market participants to establish a clear framework that fosters innovation while ensuring adequate safeguards are in place. Furthermore, the economic analysis presented in the proposal raises questions about the estimated costs and benefits of the rule. While I acknowledge the importance of investor protection and oversight, it is crucial to evaluate the economic impact of the proposed rule accurately. The SEC's assessment should consider the potential cost burdens imposed on investment advisers and the impact on competition and capital formation. Transparent oversight is essential, but it should not unduly burden market participants, especially small entities. Additionally, the proposal's paperwork reduction analysis warrants further scrutiny. The estimated burden of compliance on investment advisers, particularly small entities, needs to be closely examined to ensure it is reasonable and proportional to the desired outcomes. It is essential to strike a balance between effective regulation and minimizing unnecessary administrative burdens. In conclusion, I urge the SEC to address the inconsistencies in the proposed rule's treatment of utility tokens and to develop a comprehensive framework that supports innovation in the digital asset space. Furthermore, I encourage the SEC to conduct a thorough and accurate economic analysis to assess the costs and benefits of the proposed rule, with careful consideration of its impact on market participants, particularly small entities. I appreciate the opportunity to provide my input on this important matter, and I look forward to seeing revisions that address the concerns and issues raised by various stakeholders. Thank you for considering my comments. Sincerely, John Chavez 520-380-7075