Oct. 29, 2023
Chris Re: Proposed Rule: Safeguarding Advisory Client Assets File Number: S7-04-23 Dear Sir/Madam, I am writing to provide my public comment on the proposed rule to address the safeguarding of client assets by investment advisers, as outlined in the "Safeguarding Advisory Client Assets" proposal, file number [Insert File Number Here]. Firstly, I must express my concern regarding the lack of industry expertise within the Securities and Exchange Commission (SEC) in drafting this proposal. It is evident that the SEC does not have sufficient expertise in digital assets and cryptocurrency, resulting in a limited understanding of the unique characteristics and intricacies of the industry. The proposal, as it stands, does not adequately address the challenges and regulatory uncertainties posed by digital assets such as cryptocurrency, which are transforming the finance landscape. Digital assets, built on blockchain technology, have quickly gained momentum and are becoming an integral part of our financial system. However, due to their relatively new and evolving nature, regulatory frameworks must be carefully crafted to ensure both investor protection and innovation are fostered. The lack of expertise within the SEC in this domain raises concerns about its ability to accurately assess the risks and opportunities presented by digital assets. Moreover, it risks stifling innovation by imposing burdensome requirements that may not be reflective of the underlying technology. In order to address this concern, I urge the SEC to engage with experts and industry participants to gather insights and understanding on the emerging digital asset landscape. Collaboration and consultation would enable the SEC to develop a more comprehensive and informed approach to regulating digital assets, enabling appropriate safeguards while nurturing innovation. Additionally, I would like to highlight the need for the proposed rule to strike a balance between investor protection and the promotion of capital formation and competition. While it is crucial to enhance investor protections and mitigate principal-agent problems, the rule should avoid unduly burdening investment advisers and qualified custodians, thereby impeding efficiency and stifling competition. Furthermore, I believe that the proposed amendments could benefit from more specific guidance regarding the safeguarding of digital assets that cannot be maintained with a qualified custodian. This issue is particularly relevant in the context of digital assets that provide unique ownership and control mechanisms through cryptography and smart contracts. The SEC should consider providing clearer instructions in order to avoid unnecessarily restricting the ability of investment advisers to effectively safeguard these assets. In conclusion, I urge the SEC to consider deepening its expertise in digital assets and cryptocurrency to better understand the unique challenges presented by these emerging technologies. I encourage the Commission to engage with industry experts, academics, and stakeholders to gather meaningful insights and perspectives as it finalizes the proposed rule. By doing so, the SEC can strike the delicate balance between investor protection and fostering innovation for the benefit of all market participants. Thank you for your attention to these concerns. I trust that my comments will be taken into consideration during the rulemaking process. Should you require any further information or clarification, please do not hesitate to contact me. Sincerely, Chris