Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have some concerns regarding the inadequate consideration of the unique properties of cryptocurrency. It is crucial for the SEC to take into account the decentralized nature and technological complexities of cryptocurrency to avoid imposing impractical regulatory requirements. Digital assets, such as cryptocurrencies, have emerged as a transformative force in the financial industry. These assets, built on blockchain technology, offer numerous advantages, including increased transparency, efficiency, and accessibility. However, they also present unique challenges due to their decentralized nature, which differ significantly from traditional financial instruments. Therefore, any regulatory framework should carefully consider these factors to avoid stifling innovation and harming market participants. The proposed rule addresses the application of safeguards to crypto assets. However, it appears that the SEC's current proposals do not adequately recognize or address the technological complexities and security mechanisms inherent in the custody of cryptocurrencies. The decentralized nature of blockchain technology means that no single entity has absolute control over these assets, as they are stored on a distributed ledger maintained by a network of participants. It is important to acknowledge that traditional custody solutions may not be suitable or even feasible for certain types of digital assets. Imposing stringent custody requirements without considering the unique properties of cryptocurrency could hinder the ability of investment advisers to offer these assets to their clients. The SEC should encourage innovation and the development of secure custody solutions tailored specifically to digital assets. This would help promote investor confidence and ensure the safekeeping of client assets without unnecessarily burdening investment advisers. In addition, the proposed rule must also address the regulatory uncertainties surrounding digital assets. The evolving legal and regulatory landscape poses challenges for both market participants and regulators. The SEC should work towards providing clear and consistent guidance that accommodates innovation while safeguarding investor protection. Engaging in a constructive dialogue with industry stakeholders would be instrumental in creating an effective regulatory framework that promotes the responsible use of digital assets. To ensure a balanced and effective regulatory approach, I encourage the SEC to consider collaborating with industry experts, technologists, and market participants when formulating regulations specifically tailored to digital assets. This collaborative approach would not only enable the SEC to gain a deeper understanding of the technology and its implications but also foster an environment of trust and cooperation between regulators and innovators. In conclusion, while I appreciate the SEC's efforts to enhance investor protections through the proposed "Safeguarding Advisory Client Assets" rule, it is crucial to adequately consider the unique properties and technological complexities of digital assets, particularly cryptocurrencies. Impractical regulatory requirements could stifle innovation and hinder the growth of the digital asset ecosystem. By engaging in a constructive dialogue with industry stakeholders, the SEC can develop a regulatory framework that strikes the right balance between investor protection and promoting innovation. Thank you for considering my comments on this important matter. Sincerely, Zane Rosanoski