Oct. 29, 2023
Sandra Larsen 1099 38th Ave Capitola, CA 95062 October 29, 2022 Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Attn: File No. UF72042 Dear Securities and Exchange Commission, I am writing to provide public comment on the proposed rule "Safeguarding Advisory Client Assets" (File No. UF72042) issued by the Securities and Exchange Commission (SEC). While I appreciate the SEC's efforts to enhance investor protections, I have concerns about the lack of industry expertise reflected in the proposal, particularly in the area of digital assets and cryptocurrency. It is clear that digital assets, such as cryptocurrency, are transforming the financial industry. They are built on blockchain technology, providing decentralized and secure platforms for financial transactions. However, the regulatory landscape surrounding digital assets is still evolving, and uncertainties persist. It is crucial for regulators like the SEC to possess a deep understanding of the unique characteristics of digital assets before devising rules that may affect this burgeoning industry. One concern I have is the mischaracterization of digital assets as traditional "assets" under the proposed rule. Unlike traditional assets, digital assets are not physical entities but rather lines of immutable code. They do not fit neatly into the current regulatory framework. The proposed rule's attempt to subject digital assets to custodial requirements may not fully account for the decentralized nature of these assets. It is essential to recognize that digital assets, including cryptocurrency, do not require custodians in the same way as traditional assets. Additionally, the SEC lacks specific expertise in the digital assets and cryptocurrency space, as shown by Gary Gensler. The rapid pace of technological advancement in this space demands a deep understanding of blockchain technology, smart contracts, and decentralized finance. Without adequate expertise, there is a risk that regulations developed without industry input may stifle innovation and hinder the development of this transformative technology. To address this concern, I urge the SEC to collaborate with industry experts and stakeholders who have a deep understanding of digital assets and cryptocurrency. Such collaboration would ensure that regulatory proposals are rooted in practical considerations, account for the unique features of digital assets, and strike an appropriate balance between investor protection and innovation. Furthermore, I recommend the SEC consider working towards establishing an industry-specific advisory committee or consulting with existing organizations in the digital asset space, ensuring a continuous dialogue between regulators and industry participants. Through these means, the SEC could leverage expertise from various stakeholders to craft regulation tailored to the dynamic landscape of digital assets and protect investors without stifling innovation. In conclusion, I believe it is crucial for the SEC to acknowledge the unique characteristics of digital assets and cryptocurrency when formulating regulations. The lack of industry expertise in developing the proposed rule may lead to unintended consequences for the rapidly evolving digital asset industry. By collaborating with industry experts, the SEC can ensure that any regulations in this space strike the appropriate balance between investor protection and fostering innovation. Thank you for considering my comments. I urge the SEC to carefully review the concerns raised by stakeholders regarding the lack of industry expertise in the proposed rule and take appropriate steps to engage with the digital asset industry throughout the regulatory process. Sincerely, Sandra Larsen