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,