Oct. 23, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I acknowledge the importance of investor protection, I have concerns about the potential negative impact of these rule proposals on the rapidly evolving and innovative sector of decentralized finance (DeFi). One particular area of concern is the lack of sufficient limitations on reporting requirements for protocols run outside the United States and users located outside the United States. It is important to recognize that DeFi projects operate on a global scale, with users and protocols spanning across borders. Imposing broad reporting requirements without relevant exceptions may hinder the growth and development of DeFi projects, limiting innovation and potential financial inclusion. This could be particularly detrimental for users in countries with limited access to traditional financial services. Furthermore, the proposed rule should consider the unique characteristics of decentralized ecosystems. DeFi projects often function through permissionless protocols and smart contracts, which do not involve traditional custodial arrangements. The inclusion of such projects within the scope of these regulations may create unnecessary burdens and compliance costs without proportionate risk. It is essential to strike a balance between investor protection and not stifling innovation in this burgeoning sector. In light of these concerns, I urge the Securities and Exchange Commission to carefully evaluate the potential negative impact that these rule proposals may have on the growth and development of DeFi projects. There should be a commitment to promoting a regulatory environment that encourages innovation, fosters financial inclusion, and positions the United States as a leader in the global DeFi ecosystem. Thank you for considering my comments. I trust that you will take into account the observations and recommendations provided to ensure a balanced and effective regulatory framework. Sincerely, Balveer Singh