Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to submit a public comment on the proposed rule "Safeguarding Advisory Client Assets" (File Number S7-31-20). The proposal aims to enhance the protection of investor assets and address gaps in the current custody rule. While I support the overall goal of investor protection, I have concerns regarding the lack of clarity on Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements for digital assets, specifically cryptocurrencies. These uncertainties create risks for market participants and could undermine the effectiveness of the proposed rule. As the financial industry undergoes a transformative period with the emergence of digital assets, it is crucial to establish clear regulatory frameworks to mitigate risks and protect investors. However, the proposal fails to provide explicit guidance on AML and KYC requirements for digital assets, leaving market participants uncertain about their responsibilities and obligations. Without clear guidelines, it becomes challenging for investment advisers to comply with regulatory obligations and establish robust AML and KYC practices. One of the primary concerns with digital assets, such as cryptocurrencies, is their susceptibility to hacking and illicit activities. The lack of clear guidance on KYC requirements for digital assets raises concerns about the security and privacy of sensitive client information. The collection and storage of KYC data could become a potential honeypot for hackers, exposing both investors and investment advisers to significant cybersecurity risks. This lack of clarity could deter market participants from engaging in digital asset transactions, hindering the growth and development of this innovative sector. To address these concerns, it is imperative that the SEC provides explicit guidance on AML and KYC requirements for digital assets within the proposed rule. This guidance should take into consideration the unique characteristics of digital assets, such as their decentralized nature and pseudonymous transactions. By establishing clear standards for AML and KYC compliance in the digital asset space, the SEC can foster a more secure and transparent environment for investors and investment advisers. Furthermore, considering the rapid pace of technological advancements within the digital asset industry, the SEC should proactively engage with industry participants, experts, and other regulatory bodies to ensure that the proposed rules remain effective and relevant. Collaboration and open dialogue will enable the SEC to stay informed about evolving industry practices and successfully adapt regulatory requirements to address emerging risks. I believe that by addressing the aforementioned concerns regarding AML and KYC requirements for digital assets, the SEC can strengthen the proposed rule and provide market participants with the clarity needed to effectively safeguard client assets in the digital asset space. This, in turn, will enhance investor protection, promote market integrity, and foster the responsible growth of the digital asset industry. Thank you for considering my comments. I urge the SEC to carefully evaluate the implications of the proposed rule on the digital asset industry and provide clear guidance on AML and KYC requirements. Additionally, I encourage the SEC to actively engage with industry stakeholders to ensure the ongoing effectiveness of regulatory frameworks in this rapidly evolving field. Rethink this rule ASAP! Concerned Citizen