Oct. 30, 2023
Dear Sir/Madam, I am writing to express my concerns about the recently released "Safeguarding Advisory Client Assets" guidelines issued by the Securities and Exchange Commission. While the proposal aims to enhance transparency and accountability in the digital asset industry, it also poses several challenges that warrant careful examination. Firstly, I strongly oppose the requirement for investment advisors to follow strict segregation rules pertaining to digital assets held in custody. The proposed guideline implies that a separate account should be maintained for each individual client, creating additional administrative burdens that can significantly increase operating expenses. Furthermore, this rule fails to take into account the decentralized and interoperable nature of blockchain-based ecosystems where users often interact with multiple platforms simultaneously. It is imperative that policymakers recognize the uniqueness of digital assets and devise more practical and efficient alternatives to ensure their safety and security without compromising user experience. Secondly, I believe that some of the suggested best practices concerning digital asset safekeeping are too general and lack specificity. For instance, the statement requiring advisors to keep private keys secure under their control appears ambiguous as it does not clearly define the scope of key management responsibilities. Additionally, the provision recommending the use of multi-signature wallets raises questions around liability allocation and dispute resolution processes since multiple parties have joint access rights to the same set of keys. Clear definitions, detailed explanations, and concrete examples are necessary to clarify such vague language and minimize misunderstandings. Lastly, I disagree with the suggestion that all digital asset transactions must adhere to Know Your Customer (KYC) and Anti-Money Laundering (AML) standards. This position overlooks the fact that many emerging digital asset projects and startups rely heavily on peer-to-peer networks, trading platforms, and other nontraditional sources of financing that are beyond the purview of conventional banking institutions. Imposing KYC/AML obligations on every single digital asset trade could result in severe limitations on the availability and affordability of new products and services, thereby inhibiting innovation and limiting opportunities for small-scale entrepreneurs and investors. In conclusion, I encourage the SEC to exercise caution and restraint when crafting future policies relating to digital assets. A thorough analysis of the potential impacts and implications of various proposals is essential to ensure that they align well with broader strategic objectives, including fostering job creation, spurring economic growth, and preserving consumer choice. Careful deliberations and informed debates are critical to finding effective and equitable ways of addressing complex legal and regulatory issues in this nascent yet fast-evolving domain. Thank you for considering my input. Sincerely,