Oct. 29, 2023
Dear Sir or Madam, I have read the proposal to amend the custody rule under the Investment Advisers Act of 1940 and I would like to share my feedback with you. I believe that the proposal would be a disaster for the industry, which would ruin both the investors and the innovators. I would like to highlight some points that I think should be rejected or deleted: - The definition of qualified custodians: The proposal asks for feedback on whether qualified custodians should be limited to federally regulated banks. I strongly oppose this idea, as it would exclude many existing and potential crypto custodial firms that are state-licensed trust banks of New York State. These custodial firms are the only ones that can effectively and securely custody and audit crypto assets. They also have the necessary experience and expertise in dealing with the volatility and complexity of crypto assets. - The requirements for financial reporting and auditing: The proposal would introduce the requirement for financial reports of non-US clients to include information that is similar to those under US-GAAP, and to reconcile the differences with US-GAAP. I consider this to be an unreasonable and unnecessary burden for non-US clients, who may have different accounting standards or practices. The application of US-GAAP to crypto assets is also completely inappropriate and misleading, as there are no clear or consistent guidelines on how to determine the fair value or the realized and unrealized gains or losses of crypto assets. - The flexibility and innovation in the industry: The proposal could prevent or hinder access to crypto assets as an asset class. It could also exclude or disadvantage some crypto assets that do not meet the traditional criteria for securities or funds. For example, some decentralized finance protocols (DeFi) or non-fungible tokens (NFTs) could fall under this category. These crypto assets represent some of the most innovative and promising developments in the free crypto industry. They offer investors new opportunities to diversify their portfolios and increase their returns. They also promote financial inclusion and autonomy for people around the world. I hope that you will take my feedback seriously and reject or withdraw the proposal accordingly. I believe that the SEC can play an important role in regulating and promoting the crypto industry, without sacrificing its security or innovation. I thank you for your attention and your efforts to protect and inform the investors.