Oct. 28, 2023
I am writing to provide a public comment on the proposed rule "Safeguarding Advisory Client Assets" (the Proposal) as laid out by the Securities and Exchange Commission (SEC). While it is commendable that the SEC aims to enhance investor protections and address gaps in the custody rule, I would like to express my concerns regarding the inadequate consideration of the unique properties of cryptocurrency. Digital assets, including cryptocurrencies, have significantly transformed the financial landscape due to their decentralized nature and technological complexities. However, it appears that the SEC's rules fail to fully recognize these distinctive features, resulting in impractical and burdensome regulatory requirements. One of my primary concerns revolves around the issue of government overreach. While it is important to establish safeguards to protect investors, it is equally vital to ensure that regulatory measures do not stifle innovation and hamper the growth of emerging technologies. By imposing stringent and rigid rules without a comprehensive understanding of digital assets, the SEC risks hindering the potential benefits that these assets can offer. Moreover, the proposed rule fails to address the evolving nature of cryptocurrencies and the decentralized infrastructure on which they are built. Digital assets operate within a unique ecosystem that may not fit neatly into traditional custodial models. By not taking this into account, the proposed rule may inadvertently hinder legitimate and responsible custody practices that effectively safeguard client assets. I would like to stress the need for the SEC to engage with industry experts and stakeholders to gain a deeper understanding of the intricacies of cryptocurrencies. By fostering an open dialogue and seeking input from those actively involved in the digital asset space, the SEC can develop more informed and nuanced regulations. Additionally, I urge the SEC to consider embracing a principles-based regulatory framework for digital assets. Such an approach would enable innovative solutions that are tailored to the characteristics of these assets, while still adhering to fundamental investor protection principles. It would allow for the flexibility needed in addressing evolving digital asset technologies, without compromising the SEC's regulatory objectives. In conclusion, while I appreciate the SEC's efforts to enhance investor protections through the Proposal, I believe that greater consideration of the unique properties and challenges posed by digital assets is necessary. Failure to do so may result in impractical and ineffective regulations that hinder the growth of this innovative asset class. I strongly encourage the SEC to engage with industry experts and stakeholders to foster a more thoughtful and balanced approach to regulating digital assets. Thank you for considering my comments. I trust that you will carefully review and address the concerns I have raised.