Oct. 30, 2023
Dear Sir/Madam, I am writing to submit my public comment on the proposed rule "Safeguarding Advisory Client Assets" (File No. S7-09-19) issued by the Securities and Exchange Commission (SEC). I have reviewed the proposed rule and identified several concerns and considerations that I believe merit attention in the final rule. Firstly, I would like to address the SEC's approach regarding self-custody solutions. In the current digital era where cryptocurrencies and other digital assets are gaining prominence, it is essential for regulators to establish a forward-thinking regulatory framework. The proposed rules, however, fail to adequately account for the potential benefits and risks associated with self-custody solutions. Given the disruptive nature of digital assets and the evolving technologies underpinning them, it is essential for the SEC to provide clear guidelines that accommodate both centralized custodianship and decentralized self-custody solutions. By neglecting to fully explore the potential of self-custody solutions, the SEC may inadvertently hinder innovation and limit the opportunities available to investors. Furthermore, the proposed rules could have unintended consequences for the development and adoption of cryptocurrencies and blockchain technology. The decentralized nature of blockchain technology serves as a cornerstone for digital assets and provides higher levels of security and autonomy for investors. By mandating reliance on centralized custodians, the proposed rules may impede the advancement of decentralized finance and limit market access, potentially negating the very advantages that digital assets offer. It is imperative that the SEC strike a delicate balance when considering custodial requirements for digital assets, taking into account their unique characteristics and the potential for decentralization. Additionally, the proposed rules may have unintended consequences on competition within the financial industry. By heavily favoring centralized custodianship, the SEC risks reducing access to digital assets and stifling competition and innovation within the market. It is crucial for the final rule to account for the varying custodial options available to investment advisers, ensuring that a diverse and competitive landscape is maintained. This can be achieved through the implementation of clear guidelines and standards that encourage a healthy, competitive market for custodial services. In conclusion, while I appreciate the SEC's intentions to enhance investor protections, the proposed rules require further consideration and adjustment to accommodate the unique nature of digital assets and the potential benefits of self-custody solutions. By embracing a balanced approach that encompasses both centralized and decentralized custody mechanisms, the SEC can better foster innovation, competition, and investor protection within the rapidly evolving digital asset market. I strongly urge the SEC to carefully reassess the proposed rules and engage in in-depth discussions with industry stakeholders to ensure that the final rule strikes an appropriate balance. Thank you for considering my comments. I trust that the SEC will carefully evaluate the concerns raised during this rulemaking process and take them into account when formulating the final rule.