Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to provide my comment on the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have several concerns that I believe need to be addressed for a more effective and practical regulatory framework. First and foremost, I am concerned about the inadequate consideration of the unique properties of cryptocurrency. The proposed regulations fail to take into account the decentralized nature and technological complexities of cryptocurrency, resulting in impractical regulatory requirements. Cryptocurrency operates on a fundamentally different paradigm, and imposing traditional custody requirements may not be feasible or even beneficial for investor protection. Additionally, the proposed rules create a confusing and burdensome reporting system for participants in decentralized finance (DeFi). By imposing reporting requirements on a multitude of participants in DeFi, there is a risk of generating multiple inconsistent reports for the same transaction. This would not only create confusion but also inhibit innovation and the growth of this emerging industry. It is crucial for the SEC to provide clarity and streamlined reporting mechanisms that reflect the unique characteristics of DeFi. Furthermore, I believe the proposed rule could potentially stifle competition and exacerbate compliance costs for qualified custodians. While investor protection should be a priority, it is important to strike a balance that promotes fair competition and capital formation. Excessive regulatory burdens on custodians may hinder the provision of services, limiting investor choices and creating barriers to entry for new market participants. Additionally, I would like to emphasize the need for the SEC to revise the proposed rules to ensure they are clear and easily comprehensible for the industry and investors alike. Ambiguities in the regulations can lead to unintended consequences and confusion among market participants. Clarity is key to fostering compliance and industry-wide adherence to the rules. In conclusion, while the SEC's proposed rule "Safeguarding Advisory Client Assets" has admirable intentions in enhancing investor protection, I am concerned about the inadequate consideration of the unique properties of cryptocurrency, the potential burdensome reporting requirements for DeFi participants, and the impact on competition and compliance costs for custodians. I urge the SEC to revise the regulations to address these concerns and create a regulatory framework that effectively balances investor protection with industry innovation. Thank you for considering my comments. Sincerely, Julene Buenz