Oct. 29, 2023
Dear SEC Chairman Gary Gensler, I am writing in response to the proposal on safeguarding advisory client assets by the Securities and Exchange Commission. While I appreciate the SEC's efforts to enhance investor protections, I have several concerns regarding the proposed rule amendments, particularly the potential negative impact on market liquidity, the sudden implementation timeline, and the potential harm to investors. One of my major concerns is that the proposed rules may hinder market liquidity for digital assets, making it more difficult for investors to buy and sell these assets. The cryptocurrency market, for example, operates with different custodial practices and controls compared to traditional financial assets. The rigid requirements outlined in the proposal may result in limited availability of qualified custodians for these digital assets, stifling liquidity and hindering market efficiency. Additionally, the sudden implementation timeline presented in the proposal raises concerns. It is crucial to consider the readiness and adaptability of companies and protocols to accommodate these new regulations. Rushing the implementation without proper preparation may result in unintended consequences and disruption to the market. A more gradual approach, allowing sufficient time for industry participants to comply, would provide a smoother transition and alleviate potential roadblocks to implementation. Furthermore, it is essential to consider the potential impact of these rules abroad, particularly in the global cryptocurrency market. Different jurisdictions may have varying requirements and approaches towards custodial practices for digital assets. The proposed rule amendments should strive for harmonization with international standards to ensure a cohesive and efficient regulatory landscape, avoiding unnecessary complications for firms operating in multiple jurisdictions. Though the objective of the proposed rule is to protect investors, it is crucial to consider if the regulations may inadvertently harm them more than they protect. Education and investor awareness play vital roles in promoting prudent investment practices. While additional safeguards are necessary, an overreaching regulatory approach runs the risk of creating a negative perception around digital assets and causing their prices to plummet, impacting investors who have made informed investment decisions. In conclusion, while I appreciate the SEC's intention to enhance investor protections in the advisory industry, there are several concerns that need to be addressed to ensure the smooth functioning of the market and to minimize the potential harm to investors. It is crucial for the SEC to carefully consider the potential negative impact on market liquidity for digital assets, provide a reasonable timeline for implementation, take into account the international impact, and acknowledge the importance of investor education in achieving the desired outcomes. I thank the SEC for the opportunity to comment and urge them to carefully consider these concerns to ensure a balanced and effective regulatory framework. Sincerely, Mark (highly concerned citizen)