Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns with the proposed rule "Safeguarding Advisory Client Assets" (File No. S7-31-19), which seeks to enhance investor protections and address gaps in the custody rule. While I appreciate the effort to safeguard client assets and promote investor confidence, I find certain provisions of the proposed rule to be misguided and potentially detrimental to the emerging field of decentralized finance (DeFi). One of my main concerns relates to the use of poorly defined terms throughout the rule. Terms such as "platform," "software," and "ledger" are mentioned but remain undefined, leaving room for confusion and compliance difficulties. In the context of decentralized financial systems, where these terms hold specific technical meanings, such ambiguity can pose significant challenges. It is imperative that precise and clear definitions are provided to ensure the effective implementation of the rule. Similarly, the proposed rule's definitions of terms like "wallet" and "validator" do not align with their technical meaning within blockchain and decentralized finance. This divergence creates regulatory uncertainty for DeFi projects, potentially impeding their growth and stifling innovation. It is crucial for the SEC to collaborate closely with industry experts and stakeholders to establish definitions that are comprehensive, consistent, and in line with technological advancements. Inaccurate and ill-defined terminology can have detrimental effects on an industry that has the potential to revolutionize finance and increase financial inclusion. It is paramount that the SEC acknowledges and understands the transformative impact of decentralized finance and takes a proactive approach in adapting regulations accordingly. Without this understanding, the proposed rule risks hindering innovation and impeding the progress of this promising industry. Moreover, I am concerned about the broader implications of the proposed rule on the digital economy. The digital economy, characterized by technological advancements and dynamic startups, has become a significant driver of economic growth and job creation. While investor protection should be a priority, it is crucial to consider the potential consequences of stringent regulations on the digital economy and entrepreneurship. Striking the right balance between investor protection and innovation is essential for sustainable growth. I urge the SEC to thoroughly consider the potential negative impacts that the proposed rule may have on decentralized finance and the digital economy. Blindly imposing regulations without a deep understanding of the intricacies of these emerging fields can stifle innovation and discourage investment. Open dialogue and collaboration with industry stakeholders is imperative to ensure that the regulatory measures adopted are effective, technologically neutral, and supportive of the evolving needs of the financial ecosystem. In conclusion, I implore the SEC to address the concerns raised regarding the poorly defined terms in the proposed rule. Furthermore, the potential impact of these regulations on decentralized finance and the broader digital economy must be carefully considered. It is the SEC's responsibility to embrace responsible innovation, protect investors, and facilitate the growth of the digital economy. Thank you for considering my comments on this crucial matter. Sincerely, Brittany McNeill