Oct. 30, 2023
The proposed amendment S7-04-23 to the 1940 SEC Custody Rule 206(4)-2 raises valid concerns about the effectiveness of additional regulations when existing rules may not be consistently enforced. It's crucial to address these concerns and questions regarding the SEC's oversight of the cryptocurrency market and entities like FTX. While the intention behind amending the Custody Rule is likely to enhance investor protection, it's important to recognize that regulatory authorities need to ensure the proper implementation and enforcement of existing rules before introducing new ones. Inconsistent enforcement can lead to a lack of trust in the regulatory framework and may not effectively protect the public. Before adding more rules, the SEC should prioritize the following steps: 1. Robust Enforcement: The SEC should demonstrate a commitment to enforcing existing rules consistently. This may involve taking swift action against entities that violate regulations, especially in the rapidly evolving crypto space. 2. Regular Audits: Conducting thorough audits and examinations of crypto platforms, like FTX, is essential to ensure that they comply with existing rules. Any deficiencies or issues should be addressed promptly. 3. Industry Collaboration: Collaborate with the cryptocurrency industry and other regulatory bodies to create a more comprehensive regulatory framework that addresses the unique challenges of the crypto market. 4. Education and Awareness: Investors and market participants should be educated about the risks and regulations in the cryptocurrency space to make informed decisions. 5. Adaptability: Recognize that the crypto industry is dynamic and evolving. Regulations should be flexible enough to accommodate innovation while maintaining investor protection. While new rules and amendments can be necessary to keep pace with changing markets, a strong foundation of enforcement and vigilance in upholding existing rules is paramount. Regulatory agencies, like the SEC, should be responsive to the changing landscape and the concerns of the public to build trust and ensure that their mandates of investor protection are fulfilled effectively. Sent with Proton Mail secure email.