Oct. 31, 2023
Dear Securities and Exchange Commission, I am submitting my public comment on the proposal "Safeguarding Advisory Client Assets" (File Number S7-01-19). I appreciate the Commission's efforts to enhance investor protections and address gaps in the custody rule. However, I have several concerns regarding the proposed rule, particularly in relation to the safeguarding of digital assets or cryptocurrencies. Firstly, the lack of clarity in the definition of digital assets is concerning. The proposal does not provide clear guidance on what constitutes a digital asset, leading to confusion and potential misinterpretation. This ambiguity hinders investor confidence and creates regulatory uncertainties. In order to effectively safeguard client assets in the rapidly evolving landscape of cryptocurrencies, a clear and comprehensive definition of digital assets is necessary. Furthermore, it is important to address the current legal challenges faced by the SEC in regulating digital assets. Recent court rulings have raised questions about the SEC's regulatory authority and jurisdiction in relation to cryptocurrencies. Additionally, Congress has expressed concerns that the SEC may be overreaching its authority, potentially harming investors in America. These legal and political challenges must be carefully considered and addressed in order to develop effective and enforceable regulations that prioritize investor protection. Additionally, the proposed rule's economic analysis should take into account the potential impact on innovation and competition in the digital asset space. The use of blockchain technology and cryptocurrencies has the potential to revolutionize finance and provide significant benefits to investors. However, overly burdensome regulations could stifle innovation and impede competition, ultimately harming both investors and the economy as a whole. The economic analysis should carefully weigh the benefits of enhanced investor protections against the potential costs and unintended consequences of regulatory overreach. Moreover, it is crucial to adopt a balanced approach that promotes transparency and regulatory oversight without placing an undue burden on the industry. The proposed rule's reporting, compliance, and recordkeeping requirements may impose significant costs, particularly on small entities. It is important to carefully evaluate the projected compliance requirements and consider whether there are alternative approaches that achieve the same level of investor protection without unduly burdening small advisers. Simplicity and clarity in regulatory requirements will not only benefit small entities but also enable efficient capital formation and competition. In conclusion, while I support the objective of the proposed rule to enhance investor protections, I believe that the definition of digital assets needs to be clarified to avoid confusion and misinterpretation. The SEC should also address the legal and political challenges it currently faces in the regulation of cryptocurrencies. Additionally, the economic analysis should carefully consider the impact on innovation, competition, and the overall economy. Finally, the regulatory requirements should be balanced and considerate of the potential burden on small entities. Thank you for considering my comments. I appreciate the opportunity to bring these concerns to your attention and contribute to the rulemaking process. Sincerely, Anonymous