Subject: S7-04-23: Webform Comments from Anon anonsson
From: Anonymous
Affiliation:

Oct. 31, 2023

Dear Securities and Exchange Commission,

I am writing in response to the proposed rule on "Safeguarding
Advisory Client Assets." While I applaud the SEC's efforts
to enhance investor protections and address gaps in the custody rule,
I have several concerns regarding certain aspects of the proposed rule
that may not adequately consider the unique properties of
cryptocurrency and digital assets.

Firstly, it is imperative that the SEC takes into account the
decentralized nature and technological complexities of cryptocurrency
when formulating regulatory requirements. As digital assets like
cryptocurrency continue to transform the financial landscape,
traditional regulatory frameworks may not be sufficient or practical.
Adhering to these frameworks without adequately considering the
distinctive features and challenges of cryptocurrency could stifle
innovation and hinder the potential benefits it offers.

The proposed rule, particularly in relation to cryptocurrency assets,
must strike a delicate balance between investor protections and
ensuring that regulatory requirements do not suppress the growth and
development of this emerging asset class. It is crucial that the SEC
acknowledges and addresses the regulatory uncertainties surrounding
crypto assets, in order to provide clarity and stability for market
participants.

Furthermore, the proposed rule's emphasis on demonstrating
exclusive control over crypto assets may be impractical considering
the inherent features of blockchain technology. Cryptocurrency
transactions are recorded on a distributed ledger, making it difficult
to establish traditional notions of exclusive control. Imposing
stringent control requirements that do not align with the fundamental
nature of cryptocurrencies could place excessive burdens on investment
advisers and hinder their ability to effectively safeguard these
assets.

In addition to the specific concerns relating to cryptocurrency, I
believe it is essential for the SEC to ensure that the proposed rule
does not unintentionally create barriers to entry and innovation for
fintech firms operating in the digital asset space. The rapidly
evolving landscape of digital assets requires a flexible regulatory
environment that encourages technological advancement while
safeguarding investor interests.

To that end, the SEC should consider engaging with stakeholders in the
cryptocurrency and digital asset industry to better understand the
intricacies and challenges of this space. Collaborative efforts will
allow the SEC to develop a more nuanced and effective regulatory
framework that strikes the right balance between investor protection
and industry innovation.

In conclusion, while I appreciate the SEC's proposed rule on
safeguarding advisory client assets, I urge the Commission to
thoroughly consider the unique properties and challenges of
cryptocurrency and digital assets when finalizing the rule. It is
crucial to strike a balance that fosters innovation, ensures investor
protection, and fosters the growth of this transformative sector.

Thank you for considering my comments. I appreciate the opportunity to
provide feedback on this important matter.

Sincerely,