Oct. 31, 2023
I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's aim to enhance investor protections and address gaps in the custody rule, I strongly believe that the current proposal fails to adequately consider the unique properties of cryptocurrency and imposes impractical regulatory requirements. Additionally, the implementation timeline is too sudden, and the impact on companies and protocols, especially internationally, has not been thoroughly assessed. Firstly, the proposed rule does not take into account the decentralized nature and technological complexities of cryptocurrency. Cryptocurrency operates on distributed ledger technology, where custody control is divided amongst multiple nodes. In this context, the concept of "exclusive control" becomes inherently challenging to demonstrate. Imposing rigid regulatory requirements without considering the intricacies of cryptocurrency custody could stifle innovation and hinder the growth of this emerging asset class. A more nuanced approach is needed to effectively safeguard these assets, ensuring that investors are adequately protected without impeding technological advancements. Furthermore, I am concerned about the timing of these proposed regulations. The swift implementation timeline leaves little room for companies and protocols to adapt and comply with the new requirements. Given the rapidly evolving nature of the cryptocurrency industry, companies need sufficient time to implement the necessary infrastructure and systems to meet the proposed regulations. Premature adoption may result in unintended consequences and potential disruptions in the market. It is crucial that the SEC allows for an ample transition period to mitigate potential adverse effects on industry players and investor confidence. Additionally, the impact of these regulations on the international stage cannot be overlooked. Cryptocurrency is a global phenomenon, and many companies and protocols operate across borders. The proposed rules may introduce complexities and conflicts with international jurisdictions, potentially putting U.S. companies at a disadvantage. It is essential for the SEC to engage in dialogue and coordination with international regulators to ensure consistency and avoid unnecessary barriers to global markets. In conclusion, the current proposal for "Safeguarding Advisory Client Assets" neglects the unique properties of cryptocurrency and imposes impractical regulatory requirements. I urge the SEC to take a more nuanced approach and consider the complexities of this emerging asset class while striving to enhance investor protections. Furthermore, I strongly recommend allowing for a more reasonable timeline for implementation to avoid unintended consequences and provide the necessary space for companies and protocols to adapt. Lastly, international cooperation and coordination are crucial to maintaining a level playing field and ensuring the global competitiveness of U.S. companies in the cryptocurrency industry.