Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to provide my input and concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have several reservations and nuanced points to raise in opposition to certain aspects of the proposed rule. One primary concern I have is the scope of the rule and its potential impact on the decentralized finance (DeFi) space. The proposed regulations introduce reporting requirements for a broad range of investments, including digital assets that serve multiple functions or purposes, such as collateral for loans or deployment in decentralized finance applications. This raises the concern that the reporting framework may not effectively address the unique complexities of DeFi transactions. By attempting to cover all participants in DeFi, the proposed rule risks creating confusion and generating inconsistent and redundant reports for the same transaction. This could lead to a burdensome compliance process for both investors and investment advisers, impeding innovation and growth in the DeFi space. I urge the Securities and Exchange Commission to provide clarity on how the proposed regulations will specifically address digital assets in DeFi and how the reporting framework will adapt to these complexities. It is essential to strike a balance between investor protections and regulatory requirements that foster innovation and competition. Furthermore, I would like to highlight the need for a transparent and predictable compliance environment for DeFi participants. The proposed rules should provide clear guidelines on qualifying as a qualified custodian in the context of crypto assets. This clarity will not only ensure proper protection of client assets but also facilitate the seamless adoption of decentralized finance solutions, benefiting both investors and the broader financial ecosystem. In conclusion, while I appreciate the SEC's mission to enhance investor protections, I have concerns regarding the potential impact of the proposed rule on the DeFi space. I urge the SEC to carefully consider the unique complexities surrounding digital assets in DeFi transactions and provide clear guidance that strikes a balance between investor protections and an innovative and competitive environment. Clarity and reasonable regulatory requirements are paramount to foster growth, safeguard investor interests, and ensure the overall health of the advisory industry. Thank you for reading this.