Oct. 28, 2023
To whom it may concern at the Securities and Exchange Commission, I, A Concerned U.S. Citizen, hereby submit my public comment on the proposed rule "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). I write to express my concerns and suggest improvements to ensure the effective safeguarding of digital assets by investment advisers. Digital assets, such as cryptocurrencies, have become an integral part of the modern financial landscape. They offer innovative and decentralized solutions, but their novel nature raises unique regulatory challenges. While it is commendable that the SEC is addressing the safeguarding of client assets, I raise concerns about the lack of clarity provided regarding custody requirements for digital assets. The proposed rule, as it currently stands, does not provide clear guidelines on how investment advisers should safeguard digital assets. The rapidly evolving nature of digital assets requires a more proactive approach to address the potential risks associated with custody. Without explicit and well-defined custody requirements, market participants are left in a state of uncertainty, inhibiting the growth and development of this innovative space. To address this issue, I urge the SEC to collaboratively engage with industry experts, market participants, and other relevant stakeholders to craft comprehensive guidelines for the custody of digital assets. This engagement should focus on establishing clear custody standards, protocols, and best practices tailored to the unique characteristics of digital assets. Furthermore, the guidelines should consider the potential use of emerging technologies, such as multi-signature wallets and smart contracts, to enhance security and accountability in the custody process. Additionally, the SEC should take into account the diverse and evolving nature of digital assets when formulating custody requirements. Digital assets encompass a wide range of instruments, including cryptocurrencies, security tokens, and non-fungible tokens (NFTs), each with distinct characteristics and associated custody challenges. Specific guidelines should be developed for each type of digital asset, ensuring adequate protection for investors while also promoting innovation and market efficiency. Moreover, the SEC must consider striking the right balance between safeguarding client assets and avoiding overly burdensome regulations that could stifle market growth. Flexibility and adaptability should underpin any regulatory framework governing digital asset custody. As the technology and market continue to evolve, ongoing recalibration may be required to ensure consistent, effective, and informed regulation in this space. Furthermore, the SEC should consider leveraging existing frameworks and gaining insights from global regulatory counterparts who have made significant strides in addressing digital asset custody. Collaboration and information-sharing across jurisdictions could foster a more robust and globally harmonized approach, reducing regulatory arbitrage and promoting investor confidence. In conclusion, the proposed rule "Safeguarding Advisory Client Assets" by the SEC is an important milestone in ensuring the proper protection of client holdings. However, it falls short in providing clear guidelines for the custody of digital assets, leaving market participants in a state of uncertainty and inhibiting the growth of this transformative space. I urge the SEC to work in collaboration with industry stakeholders to develop comprehensive and tailored guidelines specifically for safeguarding digital assets, taking into account their unique characteristics and the potential benefits of emerging technologies. Thank you for considering my comments. I trust that the Securities and Exchange Commission will carefully review and implement the necessary changes to address the concerns raised by stakeholders. Please do not hesitate to contact me should you require any further clarification or information. Respectfully, A Concerned U.S. Citizen