Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing this public comment as a concerned U.S. citizen to express my apprehension regarding the Securities and Exchange Commission's (SEC) proposed rule on safeguarding advisory client assets. While I acknowledge the need to enhance investor protections and address gaps in the custody rule, I believe some aspects of the proposed rule may have negative implications, particularly in relation to digital assets or cryptocurrencies. Digital assets, such as cryptocurrencies, have emerged as a transformative force in the financial industry, leveraging blockchain technology to enable innovative financial solutions. However, these assets are still navigating regulatory uncertainties and face unique challenges. The proposed rule's expansion of coverage to include a broader range of investments held in a client's account could inadvertently hinder market liquidity for digital assets, making it more difficult for investors to buy and sell these assets freely. Regulatory certainty and a supportive environment are crucial for the healthy development of the digital asset ecosystem. Imposing additional burdens and compliance requirements on investment advisers dealing with digital assets would create obstacles to their adoption and integration into the broader financial landscape. This could impede the potential benefits these assets could offer when conducting efficient, cost-effective, and secure financial transactions. Furthermore, the proposal acknowledges the challenges in demonstrating exclusive control over digital assets, which raises concerns about how investment advisers can effectively safeguard these assets. While it is essential to protect client assets, the proposal should carefully consider the unique characteristics of digital assets and explore flexibility in establishing appropriate safeguards. Striking a balance between investor protection and regulatory burdens is crucial to fostering a supportive regulatory environment for digital assets. In considering the proposed amendments to the surprise examination requirement, it is paramount to address the specific characteristics and challenges associated with digital assets custody. Clarifying how surprise examinations can be effectively carried out in the context of digital assets custody would provide much-needed guidance to investment advisers dealing with these assets, ensuring the appropriate protection of client assets without unduly burdening market participants. Concerns over the potential negative impact on market liquidity and the challenges associated with digital asset custody should not be downplayed or overlooked. It is vital to strive for a nuanced regulatory framework that protects investors while fostering innovation and maintaining a competitive landscape. In conclusion, I urge the SEC to carefully reexamine the proposed rule and take into account the nuances and challenges associated with digital asset custody. It is essential that any regulatory framework maintains a delicate balance, ensuring adequate investor protections without stifling the growth and development of transformative financial technologies like cryptocurrencies. Thank you for considering my concerns. I hope my comments contribute to a productive discussion and help shape a thoughtful and effective regulatory approach for the safeguarding of advisory client assets. Should there be any further opportunities or need for additional public comment, I am available to provide my insights and perspective. Yours sincerely, A Concerned U.S. Citizen