Oct. 29, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on Safeguarding Advisory Client Assets. While I understand the goal of enhancing investor protections, I believe that the rule, as currently outlined, may have a negative impact on the growth and development of decentralized finance (DeFi) projects, limiting innovation and potential financial inclusion. One area of concern is the treatment of digital assets, particularly cryptocurrencies, within the proposed rule. Digital assets, built on blockchain technology, have the potential to transform the financial industry by enabling greater access, efficiency, and transparency. However, regulatory uncertainties surrounding these assets pose significant challenges. By imposing new requirements and limitations on their custody, the proposed rule may stifle the growth of this emerging sector and impede the realization of its potential benefits. Furthermore, the rule's provisions on qualified custodian protections may not fully account for the unique characteristics and challenges associated with digital assets. Demonstrating exclusive control over cryptocurrencies, for example, can be challenging due to their decentralized nature. Imposing burdensome requirements on custodians may discourage them from offering services for digital assets, slowing down the adoption and maturation of this technology. Additionally, the proposed rule's recordkeeping and compliance requirements may place a heavy burden on DeFi projects and small entities. These projects, often built on decentralized networks, may not fit neatly into the existing regulatory framework, making compliance challenging and costly. Striking a balance between investor protection and fostering innovation is crucial to ensure that the benefits of DeFi are not overshadowed by excessive regulatory barriers. In conclusion, I urge the Securities and Exchange Commission to carefully consider the potential negative impact of the proposed rule on decentralized finance. It is vital to strike the right balance between protecting investors and fostering innovation and financial inclusion. I recommend further engagement with industry participants to better understand the unique challenges posed by digital assets and DeFi projects. By doing so, we can work towards a regulatory framework that enables the growth of this transformative technology while upholding investor protection. Sincerely, Stan Miller