Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to submit my public comment in response to the proposed rule on "Safeguarding Advisory Client Assets". While I appreciate the intent to enhance investor protections and address gaps in the custody rule, I have some concerns regarding the rule's treatment of digital assets, particularly cryptocurrency. Digital assets, such as cryptocurrency, have the potential to transform the financial landscape and bring about innovative investment opportunities. However, the proposed rule appears to inadequately consider the unique properties and technological complexities of cryptocurrency, resulting in impractical and burdensome regulatory requirements. Cryptocurrency operates on a decentralized network, and the cryptographic nature of these assets provides a high level of security. The proposed rule, on the other hand, imposes traditional custodial requirements that overlook the decentralized nature of cryptocurrency. This approach fails to recognize the substantial measures taken by market participants to secure digital assets. Furthermore, the rule's attempt to regulate custody of cryptocurrency assets could stifle innovation and impede the growth of this new and promising asset class. By imposing stringent custodial obligations, the rule may discourage investment advisers from offering cryptocurrency investment products and services, limiting access to these assets for retail investors. I understand the need for investor protections, and it is crucial to address the risks associated with digital assets. However, a more nuanced and balanced approach is required. The SEC should consider working collaboratively with industry stakeholders to develop guidance and best practices specific to digital assets, rather than shoehorning them into existing custodial frameworks. Moreover, it is important to recognize that custodial control over cryptocurrency is fundamentally different from traditional asset custody. The use of cryptographic tools, such as multi-signature wallets and decentralized finance protocols, provides robust security measures that can mitigate the risk of asset loss or compromise. By failing to account for these advancements and their ability to safeguard client assets, the proposed rule may impose unnecessary and burdensome requirements on market participants. Instead, the SEC should focus its efforts on promoting investor education and awareness regarding the unique characteristics and risks of digital assets. By enhancing transparency and providing clear guidance on best practices for safeguarding digital assets, the SEC can empower investors and investment advisers to navigate this rapidly evolving landscape while ensuring adequate protections. In conclusion, the proposed rule's treatment of digital assets, specifically cryptocurrency, raises concerns in terms of inadequate considerations for their unique properties. I urge the SEC to recognize the decentralized nature and technological complexities of cryptocurrency and work collaboratively with industry stakeholders to develop appropriate regulatory frameworks. By doing so, we can foster innovation, promote investor protection, and ensure a thriving and inclusive digital asset ecosystem. Thank you for considering my comment. Sincerely, Dale