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 intention behind this rule to enhance investor protections and address gaps in the custody rule, I believe there are several issues that need to be addressed. Specifically, I would like to highlight the inadequate consideration of the unique properties of cryptocurrency and digital assets in the proposed rule. The SEC does not seem to fully grasp the decentralized nature and technological complexities of this emerging asset class, which has led to impractical regulatory requirements. Cryptocurrency, built on blockchain technology, has transformed the traditional financial landscape. It has the potential to revolutionize investment opportunities, foster innovation, and provide financial inclusiveness. However, regulatory uncertainties continue to hinder its development and adoption. My concern lies in the SEC's overreach into the realm of cryptocurrencies. While it is important to protect investors and ensure market integrity, rigid regulations that do not account for the nuances of digital assets can stifle innovation and impede growth in this sector. Striking a balance between regulation and fostering innovation is crucial for the continued advancement of this technology. Certain provisions of the proposed rule, such as the application of custody rules to crypto assets and the challenges in demonstrating exclusive control, raise concerns. The decentralized nature of blockchain technology makes it challenging to classify digital assets within the conventional definitions of custody. Rather than imposing a one-size-fits-all approach, it would be more beneficial to consider alternative methods of safeguarding client assets, which take into account the unique characteristics of cryptocurrencies. Furthermore, the proposed requirement for enhanced recordkeeping, separation of duties, and regular reviews for assets that cannot be maintained with a qualified custodian can pose significant burdens for investment advisers dealing with digital assets. The SEC should ensure that the regulatory framework allows for efficient management of these assets while maintaining adequate investor protection. In addition, the proposed changes to Form ADV to include reporting on custody of client assets and information about custodians and accountants involved in safeguarding assets are welcome improvements in terms of transparency and regulatory oversight. However, it is essential that these changes are applied in a manner that does not create an undue administrative burden for investment advisers, particularly those dealing with digital assets. To maximize the benefits of digital assets and foster innovation, it is crucial that regulators take a nuanced and proactive approach. Collaboration with industry experts and stakeholders is necessary to develop regulations that strike the right balance between investor protection and fostering innovation. In conclusion, I urge the SEC to consider the unique properties and technological complexities of digital assets when formulating regulations. The proposed rule should take into account the decentralized nature of cryptocurrencies and provide practical guidance that promotes investor protection while allowing for innovation and growth in this space. Lastly, the potential framework needs to be crypto-friendly. As of yet, the SEC seems to be quite content in allowing rampant corruption on wall street and in many other financial areas. The zeal with which the SEC is persecuting cryptocurrency, which is both self-custodial and high-risk high-reward in nature, is frankly disturbing. It appears that the SEC, especially the head, is making emotional decisions rather than logical decisions. Please use tax-payer money to target actual criminals, not those pushing innovation. Thank you for considering my comments on this important matter. Sincerely, Crypto Enthusiast