Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide my public comment on the proposed rule "Safeguarding Advisory Client Assets." While I acknowledge the SEC's efforts to enhance investor protections and address gaps in the custody rule, I would like to express my concern regarding the inadequate consideration given to the unique properties of cryptocurrency. Digital assets, such as cryptocurrencies, have emerged as transformative innovations in the financial industry. The decentralized nature and technological complexities of these assets necessitate careful and nuanced regulatory oversight. However, the proposed rule fails to adequately account for these distinct characteristics, resulting in impractical regulatory requirements. The rule's application to crypto assets raises considerable challenges. Crypto assets are typically held in wallets, which provide custodial services outside the traditional framework. The lack of exclusive control, a concept emphasized in the proposed rule, presents a significant obstacle in applying the regulations to these assets. This omission disregards the fundamental nature of blockchain technology, which decentralizes control and eliminates the need for a central custodian. Additionally, the proposed rule's emphasis on exclusive control fails to account for the collaborative and consensus-based nature of blockchain networks. In many cases, custody of crypto assets is governed by a combination of private keys held by various stakeholders. Requiring exclusive control may not be feasible without sacrificing the security and integrity of these assets. Furthermore, the proposed rule's recordkeeping and review requirements for assets unable to be maintained with a qualified custodian are excessively burdensome. While appropriate safeguards for client assets are crucial, the proposed amendments fail to recognize the innovative approaches taken by industry participants to secure digital assets, such as multi-signature wallets and cold storage solutions. In order to foster innovation and provide effective investor protection, it is imperative that the SEC recognizes the unique properties and technological intricacies of cryptocurrencies when formulating regulatory frameworks. I urge the SEC to collaborate with industry experts and stakeholders to develop a tailored regulatory approach that considers the decentralized nature of crypto assets and promotes responsible innovation. Thank you for considering my comment and taking into account the concerns raised regarding the proposed rule's inadequate consideration of the unique properties of cryptocurrency. Sincerely, Mickey Jaramillo