Oct. 30, 2023
Members of the Securities and Exchange Commission, I respectfully request your consideration of my comments regarding the "Safeguarding Advisory Client Assets" proposal. Allow me to commence by addressing the title itself, "Safeguarding Advisory Client Assets." This title implies the presence of a third party with fiduciary responsibilities in managing investors' assets. It is worth acknowledging that certain cryptocurrencies may fall into this category, as they may not pass the Howey test, exhibit centralization, and necessitate third-party involvement in managing their functionality. However, the crypto space also encompasses "DeFi" (decentralized finance) cryptocurrencies that operate differently through technological innovation. These DeFi tokens do not rely on third parties, middlemen, or managers; instead, participants interact with immutable computer code, which undergoes scrutiny by independent auditors. If regulatory oversight is indeed required in this realm, it might be more appropriate to focus on auditing the code of these DeFi protocols. If the SEC's true intent is to protect investors, embracing and integrating this new technology into the traditional financial ecosystem could be a prudent approach. My next point of contention pertains to the term "Assets." This word implies that the instrument in question is universally recognized as having monetary value. While certain cryptocurrencies, like Bitcoin, have attained such recognition, the majority of blockchain assets have not. Consequently, they could be viewed as mere data exchanges. This observation is sincere. I cannot settle a utility bill with HEX tokens or offer Pulse coin as collateral for a loan at my bank. I also cannot invest my PulseX tokens in a Roth IRA. Traditional rules and regulations do not extend to these digital assets due to their lack of recognition as "true" assets in the financial world. This creates a dilemma for holders of such assets, as they are unable to employ conventional financial strategies to mitigate taxation, even though the IRS acknowledges their perceived US dollar value for tax purposes. I fully grasp and respect the SEC's mission. Therefore, I implore you to consider the points I have raised and refrain from hastily applying current regulations to this distinctly different realm. We must find a balanced approach that safeguards the interests of the investing public without stifling innovation or imposing undue restrictions on our pursuit of life, liberty, and happiness. I stand ready to offer my knowledge and ideas to facilitate a resolution that protects investors from unscrupulous entities while preserving freedom and sovereignty. Thank you for your attention, Mike Koski