tbot Dear SEC, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" (File No. S7-04-23), recently put forth by the Securities and Exchange Commission (SEC). While I commend the SEC's commitment to enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposal require further consideration and adjustments to accurately reflect the unique properties of digital assets like cryptocurrency. Digital assets, such as cryptocurrency, have emerged as a transformative force in the financial industry, challenging traditional regulatory paradigms. However, the current proposal does not sufficiently account for the decentralized nature and technological complexities of digital assets, creating regulatory requirements that may be impractical and challenging for investment advisers. One area of concern is the scope of the proposed rule. By expanding the coverage to include a broader range of investments held in a client's account, the SEC aims to enhance investor protections. However, the definition of assets includes digital assets, without considering the unique characteristics and challenges associated with them. Cryptocurrencies, for example, operate on blockchain technology, which is decentralized and distributed across multiple participants. Applying traditional custody principles that revolve around a singular, centralized entity could prove cumbersome and impractical. Furthermore, the proposal should address the challenges faced by investment advisers in demonstrating exclusive control over digital assets. The SEC rightly emphasizes the importance of safeguarding client assets; however, the nature of digital assets, such as cryptocurrencies, makes it difficult to establish exclusive control. The proposal should consider industry best practices and explore alternative options for demonstrating custody, recognizing the decentralized nature of digital assets and the control mechanisms employed within the blockchain ecosystem. Additionally, the proposal's approach to addressing assets unable to be maintained with a qualified custodian requires careful consideration. While enhanced recordkeeping, separation of duties, and regular reviews are critical safeguards, the SEC should develop guidelines that specifically address the unique challenges posed by digital assets. These guidelines should be based on a comprehensive understanding of the technological infrastructure supporting them, rather than focusing solely on adapting existing custodial norms. Another concern lies in the proposed amendments to the investment adviser recordkeeping rule. While the intent to improve oversight and investor protection is commendable, the amendments could potentially place an undue burden on investment advisers dealing with digital assets. The SEC should conduct a thorough analysis of the compliance costs associated specifically with digital assets, taking into account the complexities and current practices within the industry. In conclusion, as digital assets continue to transform finance, it is crucial that regulatory frameworks adapt with an understanding of their unique characteristics. While the SEC's proposal acknowledges the need to safeguard client assets, it must take into account the decentralized nature and technological complexities of digital assets, such as cryptocurrency. By engaging with industry experts and stakeholders in the digital asset field, the SEC can develop a regulatory framework that balances investor protection with innovation and growth in the market. Thank you for considering my comments. I encourage the SEC to explore the concerns raised and make necessary adjustments to accurately reflect the unique properties of digital assets. Sincerely, Johan Sinteur