Oct. 17, 2023
Subject: Concerns Regarding SEC Overreach in Safeguarding Advisory Client Assets Proposal Dear SEC, I am writing to express my concerns regarding the proposed legislation on safeguarding advisory client assets, specifically in relation to cryptocurrency and digital assets. While I understand the importance of protecting investors and ensuring the integrity of the financial markets, I believe that the SEC's approach in this proposal exhibits overreach and fails to consider the unique characteristics of these emerging technologies. Firstly, it is crucial to acknowledge that existing laws and regulations already provide a framework for the custody and protection of client assets. The Securities Investor Protection Act (SIPA) and the Investment Advisers Act of 1940, among others, establish clear guidelines for safeguarding client assets. These laws have been effective in traditional financial markets and should be applied judiciously to the cryptocurrency space, rather than imposing additional burdensome requirements. Secondly, the proposed legislation fails to recognize the decentralized nature of cryptocurrencies and digital assets. It is important to note that cryptocurrencies operate on blockchain technology, which is designed to be decentralized and distributed across a network of computers. This decentralized nature provides inherent security measures, as transactions are verified and recorded by multiple participants in the network. By imposing stringent custody requirements, the SEC risks stifling innovation and hindering the growth of this transformative technology. Furthermore, the proposed legislation does not adequately address the unique challenges and complexities associated with securing digital assets. Unlike traditional assets, cryptocurrencies are stored in digital wallets and can be accessed through private keys. These private keys are essentially the digital equivalent of a physical key to a safe deposit box. Requiring registered investment advisers to maintain custody of these private keys or use qualified custodians may not only be impractical but also introduce unnecessary risks. Additionally, the SEC's proposal fails to consider the potential impact on small businesses and startups in the cryptocurrency industry. Many innovative companies in this space may not have the resources or infrastructure to comply with the proposed regulations. This could create a barrier to entry for new players and stifle competition, ultimately limiting consumer choice and innovation. Instead of imposing burdensome regulations, the SEC should focus on fostering a regulatory environment that encourages responsible innovation and protects investors without stifling the potential of cryptocurrencies anddigital assets. This can be achieved through collaboration with industry stakeholders, including cryptocurrency exchanges, wallet providers, and investment advisers. By working together, the SEC can develop best practices and guidelines that address the unique characteristics of cryptocurrencies while ensuring investor protection. In conclusion, I urge the SEC to reconsider the proposed legislation on safeguarding advisory client assets in the context of cryptocurrency and digital assets. The current approach exhibits overreach and fails to consider the decentralized nature of cryptocurrencies, the complexities of securing digital assets, and the potential impact on small businesses and startups. Instead, the SEC should focus on fostering a regulatory environment that encourages responsible innovation and collaboration with industry stakeholders. By doing so, we can strike a balance between investor protection and the growth of this transformative technology. Thank you for considering my comments. Sincerely, Me