Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns and provide a public comment on the proposed rule for "Safeguarding Advisory Client Assets." While I understand the intent of the rule to enhance investor protections and address gaps in the custody rule, I believe certain aspects of the proposal may have a negative impact on token liquidity and hinder the ability of investors to buy and sell tokens. Digital assets, particularly cryptocurrencies, have emerged as transformative financial instruments, providing opportunities for investors and promoting innovation in the financial industry. However, the regulatory uncertainties surrounding this asset class pose significant challenges and require careful consideration. The proposed rule expands the coverage to include a broader range of investments held in a client's account, including digital assets. While the inclusion of digital assets recognizes their growing importance, it is important to ensure that the rule does not inadvertently stifle token liquidity. The nature of digital assets demands a different approach to custody, and overly burdensome requirements may impede the ability of investment advisers to effectively manage and protect these assets. One of the key challenges addressed by the proposed rule is the application of custody requirements to digital assets. The rule acknowledges the difficulties in demonstrating exclusive control over digital assets stored in distributed ledger technology. I urge the Securities and Exchange Commission to adopt a nuanced approach that recognizes the unique nature of digital assets and provides clarity on the custody requirements without imposing unnecessary burdens that could hinder token liquidity. Furthermore, the proposal outlines enhanced recordkeeping, separation of duties, and regular reviews as means to safeguard assets that cannot be maintained with a qualified custodian. While these measures are important for investor protection, the SEC should take into account the innovative and evolving nature of the digital asset ecosystem. Imposing rigid and inflexible requirements may hinder the ability of investment advisers to adapt to emerging technologies and may raise the compliance costs, ultimately impacting token liquidity. It is crucial to strike a balance between investor protections and the vibrant growth of the digital asset industry. The Commission should consider developing guidance tailored to digital assets, acknowledging their unique characteristics and associated risks, while ensuring proportionate safeguards. In conclusion, the proposed rule on safeguarding advisory client assets has commendable objectives, but it is essential to consider the potential negative impact on token liquidity within the digital asset ecosystem. I believe that a nuanced and informed approach is necessary to foster innovation while maintaining investor protections. Thank you for the opportunity to provide this public comment. I urge the Securities and Exchange Commission to carefully review the concerns raised and consider the importance of facilitating the liquidity of digital assets. If there are any clarifications needed or further discussions on this matter, I am eager to contribute and participate. Sincerely, A Concerned U.S. Citizen