Oct. 30, 2023
Dear Sir/Madam, I am writing to provide my public comment on the proposal "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission (SEC). As a concerned individual interested in the development of the regulatory framework surrounding investment advisers and their handling of client assets, I would like to raise my primary concern regarding the lack of clarity in the definition of digital assets within the proposed regulations. The proposal fails to provide clear guidance and a comprehensive definition of what constitutes a digital asset. This lack of clarity is problematic as it leads to confusion and potential misinterpretation, which in turn could negatively impact market participants and hinder the growth and innovation of the digital asset industry. By not defining digital assets with clarity, the SEC risks creating a regulatory environment that stifles technological advancements and hinders the ability of market participants to comply with regulatory requirements. Moreover, this ambiguity increases the potential for over-regulation and creates unnecessary burdens on industry participants, leaving room for inconsistent interpretations and burdensome reporting requirements. One specific area of concern is the proposed reporting requirements for various participants in decentralized finance (DeFi). The current proposal creates reporting obligations for different participants in DeFi, which could result in multiple, inconsistent reports being generated for the same transaction. This creates unnecessary complexity and burden on participants, making compliance very challenging. Furthermore, the broad terms used to describe digital assets leave open the possibility for misinterpretation, which could hinder individuals and entities operating in good faith from being able to fully comply with the regulations. This lack of clarity runs contrary to the SEC's mission of protecting investors and facilitating capital formation. Instead, it creates an environment of uncertainty that may discourage investment and innovation, while at the same time potentially benefiting the SEC by increasing its regulatory reach and control. It is important for regulatory frameworks to provide clear and precise definitions that accommodate technological advancements while balancing investor protection. By refining and providing a clearer definition of digital assets, the SEC can foster innovation and promote a competitive and vibrant digital asset industry. In conclusion, I commend the SEC for its efforts to enhance investor protections through the proposed rule. However, I urge the SEC to address the lack of clarity in the definition of digital assets and provide clearer guidance around its interpretation within the regulatory framework. This will help nurture responsible growth and innovation in the digital asset industry, while still ensuring investor protection. By doing so, the SEC can strike a balance that benefits market participants and the broader economy. Thank you for considering my concerns as part of the public comment process. Sincerely, Concerned Citizen