Oct. 29, 2023
Dear Securities and Exchange Commission, I am submitting my public comment on the proposed rule "Safeguarding Advisory Client Assets" as a concerned investor and advocate of financial innovation. While I understand the goal of enhancing investor protections, I have reservations about the potential stifling of innovation and the negative impact on global market participants. Firstly, I want to emphasize the importance of fostering innovation in the financial industry, particularly with regards to emerging technologies like smart contracts. The proposed rule doesn't adequately address the unique characteristics of smart contracts, which are transforming the way assets are managed and custodied. It is crucial that the SEC considers the potential benefits and challenges of smart contracts and creates a regulatory framework that encourages their responsible use. Failure to do so may hinder innovation and limit the growth potential of investment advisers operating within the smart contract ecosystem. Additionally, I am concerned about the potential extraterritorial impact of certain reporting requirements under the proposed rule. As a global financial hub, it is essential for the United States to strike a balance between investor protection and avoiding overregulation that hampers international market participants. It's important that the SEC engages in international coordination and cooperation, working with regulatory authorities in jurisdictions where protocols and users are located. This would ensure a fair and consistent approach to safeguarding client assets, respecting the principles of global financial comity. To address these concerns, I urge the SEC to provide clearer guidance on the treatment of smart contracts, acknowledging their innovative features while also considering the need for investor protection. This could entail defining the scope of the rule in a manner that accommodates the unique characteristics of smart contracts and provides specific criteria for investment advisers leveraging this technology. Additionally, I recommend the implementation of mechanisms for international cooperation to foster a global landscape that supports innovation while maintaining necessary safeguards. In conclusion, it is important for the SEC to strike a balance between investor protection and financial innovation. By recognizing the potential of smart contracts and promoting international coordination, the SEC can position the United States as a global leader in fostering innovation while ensuring the security of client assets. Thank you for considering my comments. Sincerely, MK