Oct. 28, 2023
Dear Securities and Exchange Commission, I am submitting this public comment in response to the aforementioned proposal to express significant concerns regarding the lack of precise definitions regarding digital assets and the attendant risks inherent in the proposed rule. The emergence and proliferation of digital assets, particularly cryptocurrencies, represent a transformative paradigm in the financial sector through the utilization of blockchain technology. However, the absence of lucid regulatory guidance pertaining to the definition of digital assets impedes innovation and poses considerable risks to market participants. It is imperative that the proposed rule comprehensively addresses this issue to foster a well-regulated and dynamic digital asset market. The primary concern arises from the lack of definitive, delineated parameters and criteria regarding what constitutes a digital asset. This nebulous construct creates ambiguity amongst market participants and may lead to potential misinterpretation. As a consequence, the dearth of regulatory clarity not only stifles innovation but also heightens legal and compliance risks for investors and businesses operating within the digital asset domain. Furthermore, the requirement stipulated in the proposal, necessitating investment advisers to function as auditors of their clients' wallets, raises pressing privacy concerns. Merely conducting a transaction with a recipient does not warrant granting unfettered access to view all transactions and operations associated with the wallet. This broad requirement may compromise investors' privacy and expose them to unnecessary risks. It is imperative to strike a judicious balance between transparency and the safeguarding of privacy in the final formulation of the rule. Given these concerns, clarification is earnestly sought on the definition of a "digital asset broker," alongside specific instances where an individual or entity might meet such criteria. Lucid definitions coupled with illustrative examples would offer much-needed clarity, enabling market participants to effectively adhere to the rule's requirements and prevent unintended consequences arising from ambiguous language and open-ended interpretations. To stimulate innovation and provide market participants with requisite guidance, the SEC ought to contemplate active engagement with industry stakeholders, including digital asset companies, investment advisers, and technologists. Collaborative efforts with industry experts will ensure that the final rule comprehensively addresses the distinctive attributes of digital assets, such as immutability, decentralization, and virtual custody. The problem with not clearly defining digital assets in the proposed rules is a big deal for everyone involved in finance. Without clear rules, it's hard for new ideas to grow, and it might not be safe for people who invest their money. It's really important that the people making these rules give clear explanations to avoid confusion and make sure the financial system is safe and fair for everyone. In conclusion, it is urged that the Securities and Exchange Commission rectify the lack of clarity in defining digital assets within the proposed rule. The provision of unambiguous definitions and specific instances, while incorporating privacy considerations, will promote innovation, protect investors, and foster broader adoption of digital assets within a regulated environment. Respectfully, Rick Schmitz