Oct. 31, 2023
Dear Securities and Exchange Commission, I am writing this public comment in response to the proposed rule on "Safeguarding Advisory Client Assets." While I appreciate the SEC's effort to enhance investor protections and address gaps in the custody rule, I have concerns regarding the lack of industry expertise in drafting the proposal, particularly in relation to digital assets and cryptocurrency. Digital assets, such as cryptocurrency, have emerged as innovative tools that are fundamentally transforming the financial landscape. However, the regulatory framework surrounding these assets is still in its infancy, and there are many unique characteristics and challenges associated with this emerging industry. My concern stems from the fact that the SEC does not have sufficient expertise in digital assets and cryptocurrency, which may result in a lack of understanding of the industry's dynamics and intricacies. As a consequence, the proposed rule may inadvertently impose burdensome and restrictive regulations that hinder innovation and impede the legitimate activities within the digital asset ecosystem. One specific example that highlights this concern is the case involving Richard Heart. The SEC has accused Mr. Heart of using funds from the cryptocurrency community to purchase goods for himself without providing evidence to support their claims. It is important to note that Mr. Heart expressly communicated that the funds raised through the Pulsechain and PulseX sacrifices were intended for the promotion of freedom of speech and movement, respectively. Individuals who participated in these sacrifices did so willingly, with no expectation of profit from the work of others. The SEC's assertion that these digital assets represent securities is misplaced and detrimental to the industry. The Pulsechain, PulseX, and HEX tokens do not embody the characteristics of securities as they exist independently of entrepreneurial efforts and are treated by users as commodities. Individuals who sent their funds during these various sacrifice phases did so to support specific causes, and there was never any implied communication or promises of profit from their contributions. Moreover, it is concerning that the SEC is projecting thoughts and intentions onto individuals who participated in these digital asset offerings, without any basis for doing so. This approach lacks clarity and undermines the principles of transparency and fair regulation that the SEC seeks to uphold. Moving forward, it is crucial for the SEC to collaborate with experts and practitioners in the digital asset industry when developing regulations related to these assets. Including voices from within the industry will provide valuable insights into the unique characteristics of digital assets and help ensure that the regulations are both effective and reasonable. In conclusion, while I appreciate the SEC's efforts to enhance investor protections with the proposed rule on safeguarding advisory client assets, I urge the commission to consider the need for industry expertise when regulating digital assets and cryptocurrency. This will help strike a balance between protecting investors and promoting innovation within this rapidly evolving sector. Thank you for considering my comments. Sincerely, Trevor Yates