Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my strong concerns regarding the "Safeguarding Advisory Client Assets" proposal. While I appreciate the goal of enhancing investor protections, I worry that the proposed rule may have unintended negative consequences, particularly on the rapidly growing sector of decentralized finance (DeFi). Digital assets, such as cryptocurrency, have emerged as powerful tools for financial inclusion and innovation. They have the potential to transform traditional finance and offer new opportunities for individuals around the world. However, regulatory uncertainties surrounding digital assets pose significant challenges to their widespread adoption. One of my main concerns with the proposed rule is its potential negative impact on the development and growth of DeFi projects. DeFi relies on decentralized networks and protocols to provide financial services directly to users, bypassing traditional intermediaries. This innovative approach has empowered individuals to gain control over their financial lives and participate in a more inclusive global economy. By imposing strict custodial requirements on investment advisers, the proposed rule threatens to stifle the progress of DeFi. The nature of decentralized finance is such that traditional custodial arrangements may not be applicable or necessary. DeFi protocols operate on smart contracts and distributed ledger technology, which provide security and transparency without the need for a centralized custodian. I understand the need to ensure the safeguarding of client assets, but it is crucial to strike a balance that recognizes the unique characteristics of digital assets and their distinct custody arrangements. Rather than imposing a one-size-fits-all approach, the SEC should consider working collaboratively with industry participants to develop flexible and technologically aligned regulations that promote both investor protection and innovation. Additionally, I urge the SEC to consider the potential unintended consequences of discouraging innovation. While the goal of the proposed rule may be to protect investors, strict regulatory measures may inadvertently limit market growth and hinder progress. It is essential to foster an environment that encourages experimentation and the exploration of emerging technologies, rather than prematurely stifling their potential. Furthermore, I would like to emphasize the significance of DeFi for individuals like myself who rely on it for financial stability. DeFi has enabled many individuals to gain access to financial services that were previously unavailable to them. By prohibiting or excessively regulating digital assets, the proposed rule risks cutting off these opportunities and limiting financial inclusion. In conclusion, while I understand and support the SEC's objective of safeguarding client assets, I believe it is crucial to approach regulatory developments in a manner that considers the unique characteristics of digital assets and the decentralized nature of DeFi. By fostering a collaborative ecosystem and embracing innovation, we can ensure investor protection while simultaneously promoting financial inclusion and economic growth. Thank you for considering my comments, and I encourage the SEC to carefully evaluate the potential impact of the proposed rule on the burgeoning ecosystem of decentralized finance. Sincerely, Anonymous