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.