Oct. 29, 2023
Dear Securities and Exchange Commission, I write to express my concerns regarding the "Safeguarding Advisory Client Assets" proposal. While I acknowledge the need for investor protections and enhanced oversight in the advisory industry, I believe that certain aspects of the proposed rule may have negative consequences, particularly in the areas of decentralized finance (DeFi) and digital assets. Firstly, I am concerned that the scope of the rule, in its current form, may hinder the growth and development of decentralized finance projects. DeFi has emerged as a transformative force in the financial industry, leveraging blockchain technology to provide innovative financial services. However, the regulatory uncertainties surrounding digital assets pose significant challenges for these projects. The proposed rule, with its expanded coverage and amendments to the custody rule, may create additional barriers and limit the potential of DeFi to foster financial inclusion and drive economic growth. It is crucial to strike the right balance between investor protection and fostering innovation in the emerging DeFi space. Furthermore, the proposed rule poses challenges for the safeguarding and regulation of digital assets, including cryptocurrencies. These digital assets have become an integral part of the financial landscape, offering new investment opportunities and avenues for growth. However, the evolving nature of digital assets creates complexities in terms of custody and regulatory oversight. While the proposed rule discusses the application of the custody rule to crypto assets, there is a need for clarity and proportionality in implementing regulations to mitigate risks without stifling innovation. I encourage the SEC to engage with industry experts and stakeholders in formulating a framework that ensures appropriate oversight while fostering continued innovation in the digital asset space. In addition, I am concerned about the economic impact of the proposed rule. The increased compliance costs and regulatory burden imposed by the rule may have adverse effects on businesses, investors, and the overall economy. It is crucial to conduct a detailed data-driven analysis to assess the potential costs and benefits of the proposed rule. We should carefully consider whether the enhanced investor protections provided by the rule are outweighed by the negative economic consequences, such as increased costs, decreased efficiency, and reduced market liquidity. A proper cost-benefit analysis should be conducted to ensure that the regulatory framework strikes a balance and promotes sustainable growth in the investment advisory industry. In conclusion, while I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe it is essential to consider potential unintended consequences in the context of decentralized finance and digital assets. Additionally, we must carefully evaluate the economic impact of the proposed rule to ensure that it does not hinder businesses, investors, or the overall economy. I encourage the SEC to engage in meaningful dialogue with industry participants and solicit feedback to refine the proposed rule in a manner that fosters innovation, protects investors, and promotes economic growth. Thank you for considering my concerns and for the opportunity to provide input on these important regulatory matters. Sincerely, Steven