Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed "Safeguarding Advisory Client Assets" rule. While I recognize the importance of enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule may have a negative impact on investor access, particularly in the emerging digital asset space. Under the proposed rule, the scope of assets covered by the custody rule would be expanded to include a broader range of investments held in a client's account, which includes digital assets such as cryptocurrencies. While the intention is to ensure the protection of client assets, I am concerned that this expansion could disproportionately affect smaller investors who are looking to participate in the digital asset market. Digital assets, built on blockchain technology, have the potential to transform finance and provide new investment opportunities. However, regulatory uncertainties surrounding these assets already pose challenges to their widespread adoption. The proposed rule may further restrict investor access to digital assets, limiting their ability to participate in this emerging asset class. Furthermore, the proposed rule also raises challenges in demonstrating exclusive control over digital assets. Cryptocurrencies, in their decentralized nature, may not fit easily within the traditional custody framework. The requirement to demonstrate exclusive control may impose additional compliance burdens on investment advisers and custodians, potentially deterring them from offering custodial services for digital assets. This limitation could hinder the development and growth of the digital asset market, impacting investor access and innovation. Additionally, the amendments to the surprise examination requirement may especially affect the custody of digital assets. While the proposed changes aim to safeguard client assets and reduce the risk of loss, there is a need for a nuanced approach when it comes to digital asset custody. Traditional surprise examinations may not be suitable or practical for the unique characteristics of digital assets, and alternative methods should be explored to ensure their secure management. I urge the Securities and Exchange Commission to carefully consider the potential negative impact on investor access to digital assets and the implications for the growth of this emerging asset class. Regulatory uncertainties and strict requirements may stifle innovation and limit investor participation. Rather than imposing restrictive measures, I encourage the SEC to explore flexible regulatory approaches that strike a balance between investor protection and fostering the growth and development of digital assets. Thank you for considering these concerns. I believe that it is crucial to approach the regulation of digital assets with an open and progressive mindset, aiming to establish a regulatory framework that promotes innovation and enhances investor protection. Sincerely, Tom Bisbee