Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to comment on the proposed rule "Safeguarding Advisory Client Assets" and would like to express my concerns regarding the lack of clarity on custody requirements for digital assets. As an investor in digital assets, particularly cryptocurrency, I believe it is crucial for the Securities and Exchange Commission (SEC) to provide clear guidelines to market participants in order to foster a healthy and secure environment for these emerging technologies. Digital assets, built on blockchain technology, have been transforming the financial landscape, offering new investment opportunities and potential risks. However, the regulatory uncertainty surrounding the custody of these assets poses significant challenges for both investors and investment advisers. Without clear guidelines, market participants are left grappling with legal interpretation and subjective judgments, which may hinder the growth and development of this industry. One of the key aims of the proposed rule is to enhance investor protections and address gaps in the custody rule. While I applaud this objective, the lack of clarity regarding custody requirements for digital assets undermines the potential benefits of the rule. Investors deserve transparency and certainty when it comes to the safekeeping of their digital assets, as we've seen numerous instances of hacking, fraud, and theft in the cryptocurrency space. Clarity is essential in building trust and ensuring the long-term viability of this market. Furthermore, the proposed rule acknowledges the challenges investment advisers face when demonstrating exclusive control over digital assets, which is essential for fulfilling custody requirements. It is imperative that the SEC addresses these challenges head-on, providing clear guidelines that take into account the unique properties of digital assets and the blockchain technology that underlies them. To alleviate these concerns and promote investor confidence, I recommend that the SEC consider the following measures in the final rule: 1. Clarify the definition of custody for digital assets: The SEC should provide a clear and comprehensive definition of custody specifically tailored to digital assets. This would include guidelines on the use of cold storage, multi-signature wallets, and other secure methods of holding digital assets. 2. Establish minimum cybersecurity standards: Given the heightened risks associated with digital assets, the SEC should establish minimum cybersecurity standards for investment advisers that hold and manage these assets. These standards should include regular audits, penetration testing, and the implementation of best practices to safeguard against external threats. 3. Encourage the development of qualified custodians for digital assets: The SEC should actively encourage the development of qualified custodians that specialize in the safekeeping of digital assets. This would create additional layers of security and alleviate concerns regarding exclusive control over these assets. 4. Foster collaboration and information sharing: The SEC should work closely with industry participants, including exchanges, wallet providers, and technology firms, to develop best practices and share information regarding the custody of digital assets. Collaboration will lead to greater clarity and standardization in the industry. Overall, it is crucial for the SEC to provide clear and comprehensive guidance on custody requirements for digital assets. Failure to do so not only stifles innovation and growth in the digital asset space but also leaves investors vulnerable to potential risks. I urge the SEC to carefully consider the concerns raised and incorporate these recommendations in the final rule. Thank you for considering my comments. I appreciate the opportunity to contribute to the rulemaking process and look forward to the SEC's continued efforts to enhance investor protections and foster a healthy investment environment. Sincerely, Me