Oct. 30, 2023
To: Securities and Exchange Commission I am writing to offer my public comment on 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 concerns regarding the lack of flexibility for innovative custodial solutions in the digital asset industry. The proposed rules appear to be designed to accommodate traditional investments, but don't leave room for innovative custodial solutions that are becoming increasingly prevalent in the digital asset space. This lack of flexibility not only stifles competition, but also hinders progress and advancement in the industry. Digital assets, such as cryptocurrencies (a.k.a. 'crypto'), have gained significant traction in recent years, with many investors looking to diversify their portfolios and take advantage of new opportunities. However, the SEC's proposed rules apparently ignore the unique nature of these assets and the potential for innovative custody solutions. By failing to provide clear guidelines or exemptions for digital asset custodians, the SEC inadvertently limits the growth and development of this rapidly evolving industry. This not only disadvantages companies offering innovative custody solutions, but it also hinders investor access to these assets and the potential benefits they may provide. In considering these proposed rules, it is essential to strike a balance between investor protections and enabling innovation in the digital asset custody space. Rather than applying a one-size-fits-all approach, the SEC should consider adopting a more flexible framework, which allows for the development and implementation of secure and effective custodial solutions specific to digital assets. I do believe that the SEC has an obligation to work collaboratively with industry experts, digital asset custodians, and other stakeholders, to develop guidelines and standards that address the unique challenges of digital asset custody while maintaining investor protections. This approach would help to ensure that investors have access to a diverse range of secure and reliable custodial solutions while still protecting against risks associated with custody of these assets. Additionally, I believe it is crucial to consider the potential amendments or exceptions to the proposed rules to address the specific needs of the digital asset industry. By doing so, the SEC can foster innovation, competition, and capital formation within this sector while still preserving the integrity of the market and protecting investors. In conclusion, I urge the SEC to reconsider its approach to custodial solutions in the digital asset industry. The proposed rules should be revisited to provide more flexibility, allowing for innovative and secure custodial solutions to thrive. By doing so, the SEC can promote competition, progress, and investor access to a broader range of assets, while still maintaining necessary and reasonable safeguards. Thank you for considering my comments. I hope my insights contribute to a thoughtful and well-rounded discussion on the proposed rule. Sincerely, J Thorne Esq.