Oct. 23, 2023
Date: 10/23/2023 Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Subject: Public Comment on Proposed Rule: Safeguarding Advisory Client Assets To Whom It May Concern, I am writing to provide my feedback and concerns regarding the proposed rule "Safeguarding Advisory Client Assets" (Release No. IA-5659, File No. S7-30-20) published by the Securities and Exchange Commission (SEC). While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have some reservations and suggestions for robust improvements to ensure the effectiveness and practicality of the proposed regulations. First and foremost, I am concerned about the inadequate consideration given to the unique properties of cryptocurrency. The proposed rule fails to take into account the decentralized nature and technological complexities associated with cryptocurrencies. This omission results in impractical regulatory requirements that may hinder innovation and growth within the cryptocurrency industry. It is crucial for the SEC to closely examine and address the nuanced characteristics of cryptocurrencies to develop regulations that are both effective in safeguarding investor assets and conducive to technological advancements. Another striking issue with the proposed rule is the presence of poorly defined terms. The use of undefined terms such as "platform," "software," and "ledger" in the regulations leaves room for varying interpretations, leading to confusion and potential misinterpretation of the requirements. Furthermore, the regulatory definitions of terms like "wallet" and "validator" do not align with their technical meanings within the cryptocurrency space. This misalignment poses significant challenges for both advisers and regulators in ensuring compliance. It is paramount for the SEC to provide clear and precise definitions of these terms to avoid any ambiguity and promote consistent understanding among industry participants. In addition to these concerns, I would like to raise a personal issue regarding the proposed rule. As an investor, the stringent requirements imposed by the SEC may have a negative impact on my investments. The potential limitations and compliance costs associated with the proposed rule could discourage investment advisers from engaging with cryptocurrencies, depriving investors like myself of the diversified investment opportunities this asset class provides. I strongly urge the SEC to consider striking a balance between investor protections and regulatory burdens to ensure fair and equitable access to cryptocurrency investments. Moreover, I applaud the SEC's recognition of the importance of transparency and recordkeeping through the proposed amendments to the recordkeeping rule and Form ADV. These enhancements are crucial for oversight, risk assessment, and investor protection. However, it is essential to streamline these requirements to avoid unnecessary redundancies and ensure that the regulatory burden is proportionate to the benefits achieved. Lastly, although these proposed rule amendments may have several economic implications, I encourage the SEC to remain vigilant in assessing the costs and benefits accurately. By incentivizing compliance and facilitating oversight and verification of adviser conduct, the proposed rules have the potential to enhance investor protection and promote confidence in the markets. However, the SEC should ensure that the estimated economic effects are not disproportionately burdensome, especially for smaller investment advisers. In conclusion, while I appreciate the SEC's efforts to address gaps in the custody rule and enhance investor protections, there are areas within the proposed rule that require further consideration. Specifically, the unique properties of cryptocurrency must be adequately considered, and clear and concise definitions should be provided. Additionally, a balanced approach that minimizes unnecessary regulatory burdens and encourages investment in innovative asset classes is vital for investor protection and market growth. Thank you for considering my concerns and suggestions on the proposed rule "Safeguarding Advisory Client Assets." I urge the SEC to thoroughly evaluate and incorporate these comments to ensure that the final regulation strikes a balance between safeguarding investor assets and promoting industry growth. Sincerely, Artmas Perine