Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets" (Release No. IA-5652; IC-34293). While I appreciate the Securities and Exchange Commission's effort to enhance investor protections and address gaps in the custody rule, I have concerns regarding certain aspects of the proposed rule and its potential impacts on the cryptocurrency industry. Firstly, I would like to address the inadequate consideration of the unique properties of cryptocurrency and digital assets. The proposed rule does not take into account the decentralized nature and technological complexities of cryptocurrency, leading to impractical regulatory requirements. As digital assets continue to evolve and transform finance, it is crucial for regulators to have a nuanced understanding of this space. Cryptocurrency operates on a decentralized network that allows for peer-to-peer transactions, eliminating the need for intermediaries. However, the proposed rule places excessive emphasis on the need for a qualified custodian to maintain exclusive control over client assets. This requirement overlooks the trustless and transparent nature of blockchain technology, which ensures the integrity of transactions without the need for a central custodian. Additionally, the rule does not adequately address the challenges associated with demonstrating exclusive control over digital assets. Unlike traditional assets, digital assets are held in digital wallets that require private keys for access. These private keys are akin to passwords and are the cryptographic means by which asset ownership is proven. Requiring exclusive control over private keys by qualified custodians may be infeasible and contrary to the fundamental principles of decentralization and user control. Furthermore, the proposed rule fails to acknowledge the efforts made by the cryptocurrency industry to establish self-regulatory bodies and best practices. Organizations such as the Blockchain Association and the Crypto Rating Council have been working diligently to establish responsible guidelines for the custody and safeguarding of digital assets. By disregarding these initiatives and proposing stringent regulatory requirements, the SEC risks stifling innovation and hindering the industry's development. To address these concerns, I recommend that the SEC collaborates with industry experts and stakeholders to develop a more tailored regulatory framework for digital assets. This framework should take into account the unique properties and mechanisms of digital assets, while still ensuring adequate investor protections. In conclusion, the proposed rule "Safeguarding Advisory Client Assets" overlooks the distinctive characteristics of cryptocurrency and digital assets. The decentralized nature of these assets requires a different approach to custody and safeguarding. Therefore, I strongly urge the SEC to reconsider the impractical regulatory requirements it has proposed for digital assets and collaborate with industry experts to develop a more comprehensive framework that fosters innovation while upholding investor protections. Thank you for considering my comments. I trust that you will carefully evaluate the concerns raised and make informed decisions regarding the regulation of digital assets and the safeguarding of client assets. Sincerely, Tam Dang