Oct. 28, 2023
Dear Sir/Madam, I am writing as a concerned U.S. citizen to express my reservations regarding the proposed rule on the safeguarding of client assets by investment advisers, as outlined in the Safeguarding Advisory Client Assets Proposal. While I appreciate the effort by the Securities and Exchange Commission (SEC) to enhance investor protections and address gaps in the custody rule, I believe there are specific areas within the proposal that require further consideration to ensure the development and adoption of open finance platforms, which are crucial for the transformation of our financial systems. One particular concern I would like to highlight is the treatment of digital assets or cryptocurrencies within the proposed rule. As we are witnessing a disruptive transformation of the financial landscape through the growth of decentralized finance and the emergence of blockchain technology, it is essential that our regulatory framework adapts to these new paradigms. The proposed rule seemingly places undue burdens on investment advisers who have exposures to digital assets, without taking into account the unique characteristics and challenges presented by these assets. Cryptocurrencies have the potential to revolutionize finance by increasing accessibility, improving efficiency, and reducing intermediation costs. However, regulatory uncertainties surrounding digital assets have already hindered their widespread adoption and integration into traditional financial systems. The proposed rule fails to provide clear guidance on the scope of its application to digital assets, particularly in situations where exclusive control and primary responsibility for safeguarding these assets may reside with the client themselves. Restricting investment advisers from effectively custodying or advising on digital assets would hamper their ability to provide comprehensive advice to clients, limiting the potential benefits and growth opportunities associated with open finance. Furthermore, the challenges in demonstrating exclusive control over digital assets, as mentioned in the proposed rule, should be addressed with a nuanced understanding of blockchain technology. The immutability and transparency provided by distributed ledger technology can provide a level of assurance that traditional custodial arrangements struggle to offer. Ignoring these potential advantages would be a disservice to both investors and the overarching goal of enhancing investor protections. To ensure the growth and development of open finance platforms, I urge the SEC to consider a more flexible approach that would accommodate alternative custody models and responsibilities for digital assets. This could be achieved through collaboration with industry stakeholders to establish robust standards and best practices that facilitate transparency, accountability, and investor protection within the open finance ecosystem. Moreover, I encourage the SEC to work towards establishing a regulatory framework that promotes innovation, encourages responsible actors, and safeguards against potential risks and abuse within the digital asset space. Incorporating digital assets into the existing regulatory landscape should not stifle their growth but rather facilitate a healthy and inclusive market for the benefit of all investors. In conclusion, while I appreciate the SEC's objective of enhancing investor protections and addressing gaps in the custody rule through the Safeguarding Advisory Client Assets Proposal, it is crucial to build a regulatory framework that acknowledges the unique characteristics and challenges of digital assets. By doing so, we can foster the growth of open finance platforms and ensure that the benefits promised by decentralized finance and blockchain technology can be fully realized. I urge the SEC to take these concerns into account during the rulemaking process and work towards a balanced and inclusive regulatory framework for the safeguarding of client assets. Thank you for considering my comments on this important matter. I trust that my input will contribute to a thoughtful evaluation of the proposed rule. Should you require any additional information or wish to further engage on these matters, please do not hesitate to contact me. Yours sincerely, A Concerned U.S. Citizen