Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets." While I appreciate the SEC's effort to enhance investor protections and address gaps in the custody rule, I believe that the rule falls short in adequately considering the unique properties of cryptocurrency. Moreover, the use of poorly-defined terms within the proposal may lead to confusion and impractical regulatory requirements. Firstly, I would like to address the inadequate consideration of the unique properties of cryptocurrency. The SEC's failure to properly acknowledge the decentralized nature and technological complexities of cryptocurrency undermines the effectiveness of the proposed regulations. By not taking into account the inherent characteristics of blockchain technology, such as its transparency and cryptographic security, the SEC risks imposing impractical and burdensome requirements on market participants. Furthermore, I am concerned about the poor definition of terms used within the proposed regulations. The inclusion of terms such as "platform," "software," and "ledger" without clear definitions leaves room for interpretation and confusion. Additionally, the definitions provided for terms like "wallet" and "validator" do not accurately reflect their technical meaning within the context of cryptocurrency transactions. This lack of clarity may result in inconsistent interpretations and hinder the effective implementation of the regulations. In light of these concerns, it is evident that lawmakers need to keep pace with the quickly developing world of peer-to-peer transactions. The current regulatory framework, rooted in traditional financial terminology, fails to account for the innovative technologies underpinning blockchain-based assets. As cryptocurrencies gain prominence and mass adoption, it is crucial that regulatory frameworks adapt to these advancements. In conclusion, I urge the SEC to reconsider the proposed rule "Safeguarding Advisory Client Assets" and conduct further analysis of the unique properties of cryptocurrency. The proposed regulations should reflect a comprehensive understanding of blockchain technology and ensure that the terms used are clearly defined and technically accurate. By aligning regulatory requirements with the evolving landscape of digital assets, the SEC can better protect investors while fostering innovation and growth in this emerging sector. Thank you for considering my public comment, and I hope that my concerns are taken into serious consideration during the rulemaking process. Sincerely, Richard Hertzberg