Oct. 24, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I understand the aim to enhance investor protections and address gaps in the custody rule, I believe that certain aspects of the proposed rule may have negative consequences, particularly in relation to the growth and development of decentralized finance (DeFi) projects. Decentralized finance has emerged as a powerful force in the financial industry, offering innovative solutions and potential financial inclusion for individuals who have been historically underserved by traditional financial systems. However, the proposed rules may hinder the progress and potential of DeFi by imposing stringent requirements on investment advisers in relation to custody of client assets. It is important to recognize that DeFi operates on decentralized networks rather than relying on traditional intermediaries. By introducing custodial requirements that may not align with the decentralized nature of these projects, the proposed rules risk stifling innovation and limiting the benefits that DeFi can offer to individuals globally. Furthermore, the definition of custody, as outlined in the proposed rule, may not fully accommodate the unique characteristics of certain assets within the DeFi ecosystem, such as cryptocurrencies. The challenge of demonstrating exclusive control over these assets should be considered in a manner that respects the decentralized nature of the blockchain technology that underlies DeFi. I urge the Securities and Exchange Commission to carefully assess the impact that the proposed rules may have on the growth and development of decentralized finance projects. We must strike a balance between protecting investors and encouraging innovation that has the potential to reshape and improve the financial landscape. In addition to my concerns regarding decentralized finance, I would also like to highlight the opportunity for further engagement and public input in the rulemaking process. While the Securities and Exchange Commission has provided a detailed overview of the proposed rules, it is essential to allow stakeholders and the public to contribute insights and perspectives that can help inform the development of regulations that are effective, fair, and conducive to market growth. Moreover, I would appreciate the opportunity to gain clarification on certain aspects of the proposal. For instance, how does the Securities and Exchange Commission envision monitoring compliance with the proposed rules in the context of evolving DeFi technologies and decentralized networks? In conclusion, I respectfully request that the Securities and Exchange Commission carefully consider the potential negative impact of the proposed rule on decentralized finance projects. I also urge the Commission to provide opportunities for further public input and clarification to ensure that the final regulations strike an appropriate balance between investor protection and fostering innovation. Thank you for considering my concerns and engaging in the transparent rulemaking process. I believe that with open dialogue and careful consideration, we can achieve regulations that encourage responsible practices and drive meaningful progress in the financial industry. Sincerely, Gerlinde Poeckl