Oct. 29, 2023
[Your Address] [City, State, ZIP] [Email Address] [Date] Securities and Exchange Commission 100 F Street NE Washington, DC 20549-1090 Subject: Public Comment on "Safeguarding Advisory Client Assets" Proposal (File No. S7-12-21) Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule titled "Safeguarding Advisory Client Assets." While I understand the importance of enhancing investor protections and addressing gaps in the custody rule, I believe that certain aspects of the proposed rule may have unintended negative consequences, particularly for the decentralized finance (DeFi) sector and individual privacy rights. 1. Potential Negative Impact on Decentralized Finance: The proposed rules, as currently drafted, may hinder the growth and development of decentralized finance projects, limiting innovation and potential financial inclusion. By broadening the scope of the rule and imposing stringent custody requirements, the SEC may inadvertently stifle the transformative potential of DeFi systems. These emerging technologies have vast implications for democratizing access to financial services and facilitating transparent and efficient decentralized markets. It is crucial that the SEC adopts a balanced approach that accommodates the unique characteristics and benefits of decentralized systems while ensuring investor protection. 2. Threat to Privacy: Privacy is a fundamental human right that underpins personal autonomy and individual freedom. The proposed rule, with its increased emphasis on recordkeeping and reporting requirements, risks compromising this fundamental right. As an investor, I value the ability to secure and maintain control over my financial information. I urge the SEC to carefully consider the potential encroachment on privacy rights and take steps to protect the confidential information of clients. 3. Encourage Innovation: Regulation should aim to strike a balance between investor protection and fostering innovation within the financial industry. Emerging technologies like blockchain and DeFi have the potential to revolutionize traditional finance and empower individuals in managing their assets. It is imperative for the SEC to create an environment that encourages innovation and agility, allowing for responsible experimentation without unnecessary barriers and burdensome compliance processes. 4. Proportional Regulatory Burden: While it is essential to protect investors and their assets, the proposed rule should also take into account the practicality and proportionality of the regulatory burden imposed on registered investment advisers. Overregulation can dampen the willingness of small and medium-sized entities to enter the market, stifling competition and limiting choices for investors. The SEC should consider the unique circumstances of different advisers and take steps to ensure that the compliance costs remain reasonable and proportionate. In conclusion, as an investor and a supporter of innovation in the financial industry, I am urging the SEC to carefully consider the potential negative impact on decentralized finance and individual privacy rights during the course of implementing the "Safeguarding Advisory Client Assets" proposal. I appreciate the SEC's commitment to enhancing investor protections, but I believe that a balanced and nuanced approach is necessary to address the concerns raised. I encourage the SEC to engage with industry stakeholders, conduct thorough impact assessments, and consider alternative solutions that would benefit investors and promote innovation. Thank you for considering my comments. I value the transparency and responsiveness demonstrated by the SEC, and I trust that my concerns will be carefully reviewed and taken into account during the rulemaking process.