Oct. 30, 2023
Public Comment on the Proposal "Safeguarding Advisory Client Assets" from the Securities and Exchange Commission To whom it may concern, I am writing to express my concerns regarding the proposed rule amendments titled "Safeguarding Advisory Client Assets" 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 believe certain aspects of the proposed rules may have unintended consequences, particularly in relation to token utility. One key concern I have is the potential negative impact that these proposed rules may have on token utility. As the digital asset space continues to evolve, tokens are often used as utility tokens to provide access to certain functionalities within a network or ecosystem. However, the proposed rules could limit the ability of tokens to fulfill their intended use cases. Tokens rely on open and decentralized networks that prioritize efficiency and scalability. By imposing custody requirements and other restrictions on market participants and investment advisers, the proposed rules may hinder the organic development and growth of utility tokens. This could stifle innovation and impede the full potential of these tokens to revolutionize various industries. Furthermore, the pace at which these proposed regulations will be implemented is concerning. The proposed rules seem to be implemented without fully allowing companies and protocols to adjust and accommodate them. This abrupt implementation could lead to unintended consequences and disrupt ongoing projects that are currently utilizing utility tokens as part of their operations. It is crucial that sufficient time and flexibility are given to market participants to adapt to these changes effectively. Moreover, the proposed regulations should also take into account the potential impact on international markets and collaborations. Utility tokens often operate in a global landscape, with companies and investors spanning across borders. Imposing strict custodial requirements and regulations could hinder cross-border collaborations and potentially disadvantage U.S.-based token projects competing with international counterparts who are subject to less stringent regulations. I urge the SEC to consider these concerns and explore alternative approaches that strike a balance between enhancing investor protections and encouraging innovation within the token economy. It is important to foster an environment that allows for the organic growth of utility tokens, as they have the potential to revolutionize industries and create new opportunities for economic growth and technological advancement. In conclusion, I appreciate the SEC's commitment to investor protection, but it is essential to weigh the potential unintended consequences of these regulations, specifically in relation to token utility. By offering more thoughtful and nuanced rules, the SEC can foster an environment that both protects investors and encourages innovation in the rapidly evolving digital asset space. Thank you for considering my comments. I trust that the SEC will carefully review all feedback and work towards regulations that strike a balance between investor protection and the promotion of innovation within the token economy. If there are any further opportunities to provide additional feedback or clarification, I would welcome the chance to contribute. Sincerely, Terenti Erd?s