Subject: S7-04-23: Webform Comments from Brittany McNeill
From: Brittany McNeill
Affiliation: American Citizen

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