Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets" by the Securities and Exchange Commission. While I appreciate the aim to enhance investor protections and address gaps in the custody rule, I believe there are certain areas where the proposed rule may exceed the SEC's regulatory authority and encroach on areas that should be regulated by other agencies. Specifically, I am concerned about the treatment of digital assets or crypto-assets under the proposed rule. Digital assets, such as cryptocurrency, are rapidly evolving and transforming the financial industry. However, there remain significant regulatory uncertainties surrounding these assets. While the proposed rule does touch upon the application of the safeguarding requirements to digital assets, it is crucial to ensure that any regulatory measures surrounding digital assets are approached with caution and in consultation with relevant regulatory bodies. The dynamic and unique nature of digital assets requires specialized knowledge and expertise that may be better addressed by agencies specifically dedicated to overseeing the crypto space. Furthermore, the proposed rule should provide clear guidelines on how investment advisers should demonstrate exclusive control over digital assets. The accountability and reliability of custody of digital assets are challenging due to the distributed nature of blockchain technology. Any regulatory requirements should balance investor protection with the need to foster innovation and ensure the development of appropriate industry best practices. Additionally, it is essential to consider the impact of the proposed rule on small entities, especially those who are actively involved in crypto-related activities. The complexity and rapid changes in the digital asset space make it challenging for small entities to keep up with evolving regulatory requirements. The SEC should carefully assess the potential compliance burden on small entities and provide appropriate support and guidance to ensure their fair and equitable treatment. In addressing the concerns related to digital assets, it is crucial for the SEC to collaborate with other regulatory bodies, such as the Commodity Futures Trading Commission (CFTC), to ensure comprehensive and harmonized regulation that is suited to the unique characteristics of these assets. Cooperation between regulatory entities will help avoid regulatory overlaps or conflicting rules that could impede innovation and obstruct regulatory compliance for market participants. In conclusion, while the proposed rule aims to enhance investor protections and address gaps in the existing custody rule, I urge the Securities and Exchange Commission to take into account the unique nature of digital assets and the potential impact on small entities. By working collaboratively with other regulatory bodies and industry participants, we can develop effective, balanced, and comprehensive regulatory measures that support the growth and development of the digital asset industry while ensuring investor protection. Thank you for considering my comments. Sincerely, (public commenter)