Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing this public comment as a concerned United States citizen to express my thoughts and concerns regarding the proposed rule "Safeguarding Advisory Client Assets" put forth by the Securities and Exchange Commission (SEC). Firstly, I would like to address the lack of industry expertise demonstrated in the drafting of the proposal. It is evident that the SEC does not have sufficient knowledge and understanding of the digital assets and cryptocurrency industry, leading to potential implications and unintended consequences in the proposed rule. As digital assets like cryptocurrency continue to revolutionize the financial sector through blockchain technology, it is imperative that regulatory bodies adequately comprehend the unique characteristics and risks associated with these assets. The proposed rule, in its current state, fails to adequately address the complexities and nuances of digital assets and crypto custody. The SEC's lack of expertise in this area is concerning, as it may result in regulatory oversight that hinders innovation and inhibits the growth potential of this emerging asset class. In order to effectively safeguard client assets and facilitate the growth of the digital asset industry, it is crucial that the SEC consults with experts from both the private sector and academia who possess the requisite knowledge and understanding. Moreover, while the proposed rule raises valid concerns regarding the custody of digital assets, the restrictions and requirements outlined within the proposal may have unintended detrimental effects. Some of the provisions, such as the requirement to maintain custody with a qualified custodian, may impose unnecessary limitations and barriers for investment advisers dealing with cryptocurrencies. This could deter market participants from fully engaging in the sector and undermine the development of a robust and regulated marketplace. It is important to strike a balance between investor protection and facilitating innovation in the digital asset industry. Rather than imposing stringent requirements that could stifle growth, the SEC should explore alternative approaches that encourage responsible practices while allowing for necessary flexibility and adaptability in this rapidly evolving field. In addition to digital assets and cryptocurrencies, it is crucial that the SEC considers the evolving landscape of decentralized finance (DeFi) and other emerging financial technologies. These innovative systems and platforms are reshaping the financial industry and warrant careful attention and guidance. Failing to acknowledge and adapt to this changing landscape may create regulatory gaps and hinder the overall effectiveness of investor protection measures. Furthermore, the economic analysis provided in the proposal lacks a comprehensive assessment of the potential impacts on competition, market efficiency, and capital formation. While investor protection is of utmost importance, it is equally critical to consider the implications on market dynamics and the potential hindrance to capital formation. The SEC should conduct a thorough and balanced analysis that takes into account the potential benefits and disadvantages of the proposed rule from both an investor protection and economic growth aspect. In conclusion, I urge the SEC to seriously reconsider the proposed rule "Safeguarding Advisory Client Assets" in its current form. The inclusion of industry experts in the rule-drafting process is essential to address the unique challenges and risks associated with digital assets and cryptocurrencies. Additionally, the economic analysis should provide a more comprehensive assessment of the potential impacts on market dynamics and capital formation. I thank you for the opportunity to express my concerns and suggestions regarding this important matter. I trust that the SEC will carefully review the public comments received during this rulemaking process and give due consideration to ensure that investor protections are balanced with innovation and economic growth. Sincerely, A Concerned U.S. Citizen