Oct. 30, 2023
To Whom It May Concern, I am writing to provide my public comment on the proposed rule, "Safeguarding Advisory Client Assets," issued by the Securities and Exchange Commission (SEC). While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have several concerns regarding the proposed rule's alignment with international regulatory standards for digital assets, the potential confusion arising from reporting requirements in decentralized finance (DeFi), and the lack of understanding of the complexities of digital assets by the SEC. First and foremost, my concern arises from the insufficient consideration of global regulatory standards for digital assets in the proposed regulations. As the digital asset market continues to evolve and cross borders, it is crucial to align regulatory frameworks to prevent fragmentation and ensure the smooth operation of cross-border transactions. However, the proposal, as it stands, lacks harmonization with international standards, potentially hindering global adoption and stifling innovation. Furthermore, the proposed reporting requirements for participants in decentralized finance appear confusing and fragmented. Regulating DeFi requires a delicate balance between investor protection and promoting innovation. The proposed rules introduce reporting requirements that cover multiple participants in DeFi, leading to the potential generation of multiple, inconsistent reports for the same transaction. This redundancy not only adds unnecessary burdens to market participants but also raises concerns about the actual effectiveness of monitoring and oversight. More troubling is the SEC's apparent lack of understanding of the complexities surrounding digital assets. While the proposed rule touches on various aspects of safeguarding client assets, the underlying assumption seems to underestimate the unique challenges and opportunities posed by the digital asset landscape. As a rapidly evolving market, digital assets necessitate a nuanced approach that considers the different characteristics and functionalities they offer. The lack of this nuanced understanding in the proposed rule raises concerns about the potential unintended consequences or hindering of innovation. I strongly urge the SEC to proactively engage with international regulatory bodies to ensure consistency and harmonization of rules governing digital assets. Fragmentation in regulation may impede market participants' ability to comply with diverging requirements and inhibit the growth of a global digital asset market. By collaborating with international counterparts, the SEC can build a framework that both fosters innovation and protects investor interests. Additionally, I recommend a careful review of the reporting requirements for participants in decentralized finance. In order to avoid confusion and administrative burden, it is essential for the SEC to engage with industry participants, actively seeking their insights and expertise. This collaborative approach will help craft more effective and streamlined reporting requirements that achieve the intended goal of investor protection without stifling innovation. Lastly, I encourage the SEC to deepen its understanding of digital assets and the underlying technology. This could be achieved by collaborating with industry experts and stakeholders who can provide valuable insights. A better understanding of the intricate nuances of digital assets will assist the SEC in developing proportionate and effective regulatory frameworks that adequately protect investors, promote fair markets, and foster innovation. In conclusion, while I appreciate the SEC's intent to improve investor protections through the proposed rule, it is crucial to reevaluate and refine certain aspects of the regulation. Adopting a globally cohesive approach, revisiting reporting requirements for decentralized finance, and improving the SEC's understanding of digital assets will lead to a more robust framework that balances investor protection, innovation, and global competitiveness. Thank you for considering my concerns and recommendations. I trust that the SEC will thoroughly evaluate all public comments to enhance the proposed rule, ultimately benefiting investors and the broader digital asset ecosystem. Sincerely, Ms. Dorados