Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to provide public comment on the proposed rule "Safeguarding Advisory Client Assets." While I understand and appreciate the SEC's goals of enhancing investor protections and addressing gaps in the custody rule, I have concerns about the rule's inadequate consideration of the unique properties of cryptocurrency. Digital assets, such as cryptocurrency, have become an integral part of the financial landscape, with blockchain technology revolutionizing the way we conduct transactions and manage assets. However, regulating these assets is a complex task that requires a nuanced understanding of their decentralized nature and technological complexities. One of my main concerns with the proposed rule is that it does not take into account the unique properties of cryptocurrency. Cryptocurrency operates on decentralized networks and is not held by traditional financial institutions or intermediaries. Therefore, imposing custodial requirements similar to those for traditional assets may not be practical or effective in the case of cryptocurrency. The proposed rule's requirements for demonstrating exclusive control over cryptocurrency assets are particularly burdensome. Blockchain technology ensures transparency and immutability of transactions, making it easier to verify ownership and transactions. Imposing rigid exclusive control requirements may hinder the use of blockchain technology and stifle innovation in the cryptocurrency space. Furthermore, the proposed rule does not adequately address the challenges posed by the global nature of cryptocurrency. Cryptocurrency transcends national borders, and many investors hold assets on exchanges located outside the United States. Imposing custodial requirements without considering these international factors may lead to regulatory conflicts and hinder the ability of investment advisers to effectively manage and safeguard client cryptocurrency assets. I urge the SEC to take a more nuanced approach to regulating cryptocurrency assets. Instead of imposing rigid custodial requirements, the SEC should consider adopting a principles-based approach that allows for flexibility and recognizes the unique characteristics of cryptocurrency. This would promote innovation and technological advancement while providing adequate safeguards for investors. Additionally, the SEC should collaborate with international regulatory bodies to establish consistent and harmonized regulatory frameworks for cryptocurrency assets. As a global phenomenon, cryptocurrency requires coordinated efforts to ensure effective investor protection while fostering innovation and competition. In conclusion, I believe the proposed rule "Safeguarding Advisory Client Assets" fails to adequately consider the unique properties of cryptocurrency. Imposing impractical custodial requirements and ignoring the decentralized nature of cryptocurrency may impede innovation and hinder the growth of this emerging asset class. I urge the SEC to take a more nuanced approach to regulate cryptocurrency assets and collaborate with international regulators to establish consistent and effective regulatory frameworks. Thank you for considering my comment. Sincerely,