Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concern regarding the proposed rule on "Safeguarding Advisory Client Assets" and its potential negative impact on blockchain innovation. While the aim of enhancing investor protections is commendable, it is essential to strike a balance between protecting investors and fostering technological advancements. One particular area of concern is the potential stifling of blockchain innovation due to excessive regulatory burdens and impediments imposed by the proposed rules. Blockchain technology has the potential to revolutionize various industries, including finance, by providing decentralized and secure solutions for recordkeeping, transactions, and custody of assets. By requiring investment advisers to adhere to specific custodial requirements and share sensitive client information with multiple third parties, there is a risk of compromising the privacy and safety of individuals. The proposed rules raise concerns about the privacy of sensitive financial data and social security numbers entrusted to investment advisers. It is vital to address these privacy concerns and ensure that the safeguards in place are effective in protecting client data from unauthorized access. While it is crucial to implement measures to safeguard client assets, it is equally important to foster an environment that encourages technological innovation. Excessive regulations may deter investment advisers and startups from exploring the potential of blockchain technology due to compliance costs and regulatory uncertainty. Instead, the Securities and Exchange Commission should consider adopting a balanced approach that acknowledges the potential benefits of blockchain technology while still ensuring investor protection. This could involve working closely with industry experts, advisers, and stakeholders to develop guidelines and best practices specifically tailored to the unique characteristics of blockchain-based systems. Furthermore, the proposed rule should provide flexibility for investment advisers to adapt to emerging technologies and evolving industry practices. Blockchain technology is still in its nascent stages, and rigid rules could limit its potential by creating unnecessary barriers to entry and hindering experimentation. In order to achieve a comprehensive and effective regulatory framework, the Securities and Exchange Commission should engage in an ongoing dialogue with industry participants, including blockchain developers, advisers, and investors. By promoting an open and collaborative approach, the SEC can address concerns related to investor protection and privacy while nurturing innovation and technological advancement. In conclusion, while it is essential to safeguard the interests of investors, the proposed rules should be carefully crafted to avoid inhibiting blockchain innovation. By fostering a balanced regulatory environment that prioritizes privacy, encourages collaboration, and allows for flexibility, the SEC can ensure both investor protection and the promotion of emerging technologies. Thank you for considering my comments. Sincerely, Stephan Dixon