Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to provide feedback on the "Safeguarding Advisory Client Assets" proposal. While I appreciate the SEC's efforts to address the safeguarding of client assets by investment advisers, I have concerns regarding the lack of clarity on custody requirements for digital assets. As the proposal does not provide clear guidelines on this matter, it creates uncertainty for market participants and potentially hinders the growth and innovation in the digital asset space. Digital assets, such as cryptocurrency, have emerged as a transformative force in the financial industry, leveraging blockchain technology to revolutionize transactions and investments. However, the regulatory landscape surrounding these assets remains complex and uncertain. Given the increasing interest and adoption of digital assets by investors and advisers alike, it is crucial to establish clear and comprehensive guidelines to ensure the safekeeping of these assets. Without clear regulations on custody requirements for digital assets, investment advisers may struggle to navigate the complexities involved in safeguarding and managing their clients' investments. This lack of clarity hinders effective risk management, thereby exposing investors to increased vulnerability. Furthermore, it impedes the development and growth of digital asset investment offerings, which can limit access to this innovative asset class for investors seeking diversification and potential returns. To address these concerns, I recommend the SEC provide additional guidance and clarification specifically tailored to digital assets. This should include explicit requirements for the custody and safekeeping of digital assets by qualified custodians. These requirements should take into account the unique characteristics and technological considerations associated with digital assets. In formulating these guidelines, the SEC should engage with industry experts and stakeholders to ensure a comprehensive and balanced approach that encourages innovation and safeguards investor interests. Collaborative efforts between the SEC and market participants will help mitigate risks and foster a regulatory environment that enables responsible growth and market integrity. I would also suggest that the SEC explore international best practices in regulating digital assets. International jurisdictions such as Switzerland, Singapore, and the United Kingdom have made significant strides in establishing regulatory frameworks tailored to digital assets. Leveraging the experiences of these jurisdictions can inform the SEC's approach, ensuring that it remains at the forefront of innovation and regulation. In conclusion, the lack of clarity on custody requirements for digital assets in the "Safeguarding Advisory Client Assets" proposal poses a significant obstacle to market participants. To promote investor protection, market growth, and regulatory clarity, I urge the SEC to provide explicit guidelines specific to digital assets. By doing so, the SEC will not only strengthen the safeguarding of client assets but also facilitate the responsible growth and innovation of the digital asset industry. Thank you for considering my comments. I look forward to further engagement on this important matter. Sincerely, Jonathan P Sent with Proton Mail secure email.