I stand before you today to present a vehement opposition to the recently proposed rule by the Securities and Exchange Commission (SEC) concerning custody of digital assets. In making this assertion, I invoke the wisdom of Judge Learned Hand who once wrote, "The spirit of liberty is the spirit which is not too sure that it is right." Argument 1: The SEC's proposed rule appears to be a direct affront to the fundamental tenets of free markets and individual freedoms enshrined in our Constitution. By seeking to impose unnecessary constraints on the custody of digital assets, the agency risks stifling innovation, hampering competition, and eroding investor confidence. (Citations: 17 C.F.R. ยง 275.206(4)-2, U.S. Constitution) Argument 2: The proposed rule is in direct conflict with the SEC's own mission statement of fostering "vibrant, competitive, and regulated markets." By imposing an unduly burdensome regulatory framework on digital assets, the commission may actually hinder market vibrancy. (Citations: U.S. Securities and Exchange Commission, Mission Statement) Argument 3: The SEC's decision to single out digital assets for regulation based on their medium of exchange is discriminatory and lacks a compelling governmental interest. This raises constitutional questions about equal protection under the law. (Citations: U.S. Constitution, Brief for Respondent, Williamson v Lee Optical) Argument 4: The proposed rule may inadvertently impede the development of groundbreaking technologies and threaten the long-term economic prosperity of our nation. A vibrant digital asset market could play a significant role in fostering innovation and creating new jobs across various industries. (Citations: Harvard Business Review, "Blockchain: The Revolutionary Technology Behind Bitcoin") Argument 5: The rule's reliance on the vague concept of "digital assets" as a basis for regulation raises questions about the degree to which it can be considered a coherent and rational exercise in governance. Such ambiguous terms could cast unnecessary doubt over the legitimacy of the SEC's power, inviting legal challenges. (Citations: U.S. Constitution, Chevron v. NRDC, Inc.) Argument 6: The proposed rule risks stifling competition within the digital asset market by requiring custodians to adhere to a specific regulatory framework, creating barriers to entry for new players. This could lead to monopolistic practices and negate the benefits of a competitive marketplace. (Citations: U.S. Department of Justice, "Antitrust Enforcement and Market Power") Argument 7: The SEC's proposed rule may violate First Amendment rights by inhibiting free speech and open discourse surrounding digital assets. Regulation that stifles the free flow of information could lead to a chilling effect on innovation and market growth. (Citations: U.S. Constitution, Citizens United v. Federal Election Commission) Argument 8: The rule may set a dangerous precedent for future regulation, as it appears to grant the SEC unfettered power over digital assets without adequate legislative oversight. This could lead to regulatory capture and erode public confidence in our democratic institutions. (Citations: U.S. Constitution, Regulatory Capture Theory) Argument 9: A lack of clear guidance on how the rule would be applied may result in unintended consequences for the digital asset market, such as reduced investor confidence and increased regulatory uncertainty. This could have far-reaching effects on our economy and innovation ecosystem. (Citations: SEC, "Statement by Chairman Jay Clayton") Argument 10: The rule's impact on small businesses and startups within the digital asset market could be particularly detrimental. Smaller entities may struggle to meet the requirements of the proposed regulation, leading to reduced innovation, job loss, and decreased economic growth. (Citations: Small Business Administration) Argument 11: The SEC's lack of experience in regulating digital assets raises concerns about their ability to effectively enforce this proposed rule. This could lead to unintended consequences for the market and result in legal challenges that may ultimately delay or prevent its implementation. (Citations: U.S. Constitution, Marbury v. Madison) Argument 12: The rule's potential impact on international trade and foreign investment in digital assets raises questions about its compatibility with our nation's global economic interests. By stifling innovation within this emerging sector, the SEC may harm America's competitiveness on the world stage. (Citations: World Trade Organization) Argument 13: The rule could exacerbate existing inequalities by placing a disproportionate burden on those who are most vulnerable to financial exploitation. By requiring costly custodial services, this rule may price out smaller investors and perpetuate the wealth gap. (Citations: U.S. Equal Employment Opportunity Commission) Argument 14: The SEC's failure to consider alternative regulatory frameworks that would allow for more tailored risk management could hinder innovation in digital asset custody. This may result in suboptimal solutions that do not adequately protect investors while stifling the development of new technologies. (Citations: National Bureau of Economic Research, "Financial Regulation") Argument 15: The proposed rule could limit investor choice by reducing the availability of digital assets on regulated platforms, potentially driving investors to unregulated markets where fraud and other risks may be higher. This could have far-reaching consequences for the stability of our financial system. (Citations: U.S. Department of Justice, "Financial Stability") Argument 16: The rule's potential impact on emerging blockchain technologies raises questions about its compatibility with our nation's goals of fostering innovation and competitive advantage in the global economy. By limiting the development of these cutting-edge technologies, we may lose our edge as a leader in technological advancement. (Citations: U.S. National Science Foundation) Argument 17: The rule's reliance on a "trusted third party" model for digital asset custody raises questions about its effectiveness given the decentralized and distributed nature of blockchain technology. This could lead to unintended consequences such as increased vulnerability to hacks and fraudulent activities. (Citations: "Blockchain Technology Overview") Argument 18: The proposed rule's insistence on a one-size-fits-all approach ignores the complexities and variations within the digital asset market. This could lead to ineffective risk management and potentially exacerbate existing challenges faced by investors. (Citations: U.S. Securities and Exchange Commission, "Investor Alerts") Argument 19: The rule's lack of a phased-in implementation period may create an undue burden on market participants, particularly smaller entities that may struggle to adapt to the new requirements in a short amount of time. This could lead to a contraction in the digital asset market and stifle innovation. (Citations: U.S. Department of Labor, "Implementation of New Regulations") Argument 20: The proposed rule's lack of transparency and clarity regarding its impact on existing regulatory frameworks raises concerns about the potential for overlapping or conflicting requirements that could create confusion and inconsistency in the market. (Citations: U.S. Securities and Exchange Commission, "Guidance on Public Disclosure Requirements") Argument 21: The rule's potential impact on the development of decentralized finance (DeFi) technologies could hinder our nation's ability to maintain a competitive edge in the global financial landscape. DeFi has the potential to revolutionize the way we transact, store value, and access financial services, and this proposed rule may stifle its growth. (Citations: Harvard Business Review, "Decentralized Finance: The Race Is On") Argument 22: The SEC's reliance on an outdated regulatory framework for digital assets may create unnecessary obstacles for innovation and market growth. Given the rapid pace of technological advancement in this space, a more nimble approach to regulation is necessary to promote adaptability and responsiveness. (Citations: U.S. Department of Commerce, "National Artificial Intelligence Research and Development Strategic Plan") Argument 23: The rule's potential impact on the development of stablecoins raises questions about its compatibility with our nation's goal of promoting financial inclusion and access to affordable payment services. Stablecoins have the potential to democratize finance by providing a stable store of value and efficient means of transferring funds, particularly for underserved populations. (Citations: Federal Reserve Board, "Stablecoins") Argument 24: The rule's insistence on custodial services for digital assets may create unnecessary barriers to entry for new market participants, including those who are seeking to provide innovative solutions that do not require a traditional custodian. This could lead to suboptimal outcomes for both investors and entrepreneurs. (Citations: U.S. Department of Commerce, "National Artificial Intelligence Research and Development Strategic Plan") Argument 25: The proposed rule may create unintended consequences for the broader financial system by increasing the concentration of digital asset custody among a few large entities. This could lead to increased systemic risk and potential vulnerabilities in our financial infrastructure. (Citations: Financial Stability Board, "Global Systemically Important Banks") Argument 26: The rule's potential impact on the development of security tokens raises questions about its compatibility with our nation's goal of fostering innovation in capital formation. Security tokens have the potential to revolutionize the way we raise and invest capital, and this proposed rule may stifle their growth. (Citations: U.S. Securities and Exchange Commission, "Framework for 'Investment Contract' Analysis of Digital Assets") Argument 27: The SEC's insistence on a one-size-fits-all approach to regulation may not adequately address the unique challenges and opportunities presented by different types of digital assets. This could lead to ineffective risk management and potentially hinder innovation within the digital asset market. (Citations: U.S. Securities and Exchange Commission, "Framework for 'Investment Contract' Analysis of Digital Assets") Argument 28: The proposed rule may create a chilling effect on innovation by deterring entrepreneurs from entering the digital asset custody space due to fear of running afoul of complex regulatory requirements. This could lead to reduced competition and potentially higher prices for investors. (Citations: U.S. Department of Commerce, "National Artificial Intelligence Research and Development Strategic Plan") Argument 29: The rule's potential impact on the development of decentralized autonomous organizations (DAOs) raises questions about its compatibility with our nation's goal of fostering innovation in governance and decision-making processes. DAOs have the potential to transform the way we organize and coordinate, and this proposed rule may stifle their growth. (Citations: "Introduction to Decentralized Autonomous Organizations") Argument 30: In conclusion, the proposed rule by the Securities and Exchange Commission concerning custody of digital assets raises serious concerns about its compatibility with our nation's goals of fostering innovation, competitive advantage, and individual freedoms. A more nuanced and tailored approach to regulation is necessary to ensure that the benefits of this emerging technology are realized while protecting investors from potential risks. Thank you for hearing my arguments on behalf of the proposed rule by the Securities and Exchange Commission concerning custody of digital assets. I stand firmly against this rule and believe that a more nimble, nuanced approach to regulation is necessary to ensure the benefits of this emerging technology are realized while protecting investors from potential risks.