Subject: S7-04-23: Webform Comments from Anonymous
From: Anonymous
Affiliation:

Oct. 30, 2023

Dear Securities and Exchange Commission,

I am writing to express my concerns regarding the proposed rule for
"Safeguarding Advisory Client Assets." While the intention
to enhance investor protections and address gaps in the custody rule
is commendable, I believe there are significant issues within the
proposed regulations that require attention and revision.

One of the major concerns I have is the unequal treatment of different
market participants. The proposed rules create a confusing web of
reporting requirements specifically targeting certain participants in
the decentralized finance (DeFi) industry. This approach risks
creating inconsistencies and unfair competition among market players.
By subjecting different participants to varying reporting obligations,
the rule introduces potential market distortions and disadvantages
specific players, undermining the principle of fair competition.

Moreover, the proposed regulations in their current form fail to
address the unique characteristics and complexities of the digital
asset market. The regulations risk imposing burdensome reporting
requirements on various participants in DeFi, resulting in duplicative
and inconsistent reports for the same transactions. This confusion not
only increases compliance costs but also hampers the growth and
development of the digital asset market.

Furthermore, I am particularly concerned about the potential
unintended consequences that may arise from the interaction between
the proposed regulations and other aspects of the tax code. It is
crucial to ensure coherence and consistency across all relevant
provisions to prevent any unintended distortions or unfair treatment
with regards to the treatment of losses, gains, and income
attributable to digital asset transactions.

Therefore, I urge the Securities and Exchange Commission to conduct
further analysis and make necessary adjustments to address the
aforementioned concerns. Specifically, a comprehensive review of the
proposed regulations should be undertaken to ensure fair treatment
across market participants, avoid unnecessary duplication of reporting
requirements, and maintain a coherent framework in conjunction with
other relevant provisions, such as the tax code.

In conclusion, while I appreciate the Securities and Exchange
Commission's commitment to investor protection and improved
safeguards for advisory client assets, it is crucial to address the
concerns raised to prevent unintended consequences and market
distortions. I trust that the SEC will carefully consider the feedback
provided and work towards a more comprehensive and balanced
approach.