Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" and its potential negative impact on the growth and development of decentralized finance (DeFi). While I understand the need to enhance investor protections and address gaps in the custody rule, it is important to consider the implications on emerging technologies, such as digital assets and crypto, and the role they play in transforming the finance industry. One of my major concerns revolves around the treatment of digital assets and cryptocurrencies, which are increasingly being utilized in financial transactions. These assets, built on blockchain technology, offer new opportunities for global financial inclusion and innovation. However, regulatory uncertainties surrounding them can stifle their growth and hinder the potential benefits they bring. It is crucial that the proposed rule recognizes the unique characteristics and potential of digital assets, rather than imposing one-size-fits-all regulations that may not align with their decentralized nature. Privacy is another key area of concern. The rise of digital assets has highlighted the importance of privacy in financial transactions, as individuals seek to protect their personal information and transactional data. The proposed rule should acknowledge the need for privacy-preserving mechanisms and ensure that regulations do not compromise the privacy rights of individuals involved in digital asset transactions. Balancing investor protection with privacy considerations is paramount to fostering trust and maintaining the integrity of the financial system. Additionally, it is essential to consider the potential impact on small businesses and startups involved in decentralized finance. The innovation and technological advancements in the space have the potential to promote economic growth and empower individuals with financial services. The proposed rule should be carefully crafted to avoid stifling entrepreneurial efforts and creating unnecessary regulatory burdens for small entities. Providing clarity and a supportive regulatory environment will encourage innovation and ensure that the benefits of decentralized finance are accessible to a wider population. In conclusion, while I understand the SEC's objective of enhancing investor protections through this proposed rule, it is crucial to consider the potential negative impact on the growth and development of decentralized finance. By recognizing and addressing the unique characteristics of digital assets, preserving privacy rights, and fostering a supportive environment for small entities, we can strike a balance between investor protection and promoting financial innovation. I encourage the SEC to carefully analyze the implications of the proposed rule and take into account the concerns raised by the community. Thank you for considering my comments, and I urge the SEC to carefully evaluate the potential consequences of the proposed rule on decentralized finance. Sincerely, David