Oct. 28, 2023
I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I understand the aim to enhance investor protections and address gaps in the custody rule, I have several concerns and issues with the proposed rule that I would like to address. Firstly, I am concerned about the lack of flexibility for innovative custodial solutions, particularly in the digital asset industry. The SEC's proposed rules do not provide room for innovative custodial solutions in this rapidly evolving space. Digital assets, such as cryptocurrencies, have revolutionized the finance industry by utilizing blockchain technology. However, regulatory uncertainties surrounding these assets pose significant challenges to their custody. By stifling competition and hindering progress, the proposed rules may impede the growth and development of the digital asset industry. It is important for the SEC to consider innovative and secure custodial solutions that can adequately protect client assets while allowing for the unique nature of digital assets. Additionally, I would like to address the proposed rule's treatment of digital assets or crypto assets in general. The SEC's approach to these assets must be carefully balanced. On the one hand, it is crucial to promote investor protection and establish clear guidelines for custody of digital assets. On the other hand, it is important not to stifle innovation and hinder the potential benefits that digital assets can bring to the financial industry. The proposed rule should offer more nuanced considerations for the unique characteristics and risks associated with digital assets, ensuring that investor protection is upheld without impeding the growth of the industry. Furthermore, I have concerns regarding the economic analysis of the proposed rule. While I appreciate the SEC's efforts to assess the costs and benefits of the amendments, the complexity and variability of custodial practices among investment advisers make it challenging to accurately estimate the economic effects. It is important for the SEC to conduct a detailed analysis that considers the potential impacts on efficiency, competition, and capital formation. This will enable a comprehensive evaluation of the proposed rule's potential benefits and costs, while also addressing any unintended consequences that may arise. In conclusion, while I recognize the importance of investor protections and the need to address gaps in the custody rule, I believe that the proposed rule can be further refined to provide more flexibility for innovative custodial solutions, particularly in the digital asset industry. It is essential for the SEC to foster a regulatory environment that encourages growth and innovation while balancing the need for investor protection. I appreciate the opportunity to provide my feedback on this proposal. Please consider my concerns as you continue to review and update the rules regarding the safeguarding of advisory client assets. Thank you for your attention to this matter.