Oct. 30, 2023
Re: Public Comment on Proposed Rule - Safeguarding Advisory Client Assets - File Number S7-03-07 Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on safeguarding advisory client assets (File Number S7-03-07). While I understand the need for investor protections and the importance of addressing gaps in the custody rule, I believe that certain aspects of the proposed rule may have a negative impact on blockchain innovation, specifically with regards to digital assets or cryptocurrencies. Digital assets, such as cryptocurrencies, have emerged as a transformative force in the financial industry, fueled by blockchain technology. These advancements hold tremendous potential to increase efficiency, lower transaction costs, and democratize access to financial services. However, the regulatory uncertainties surrounding digital assets create challenges and hinder the growth of this nascent industry. With the proposed rule, there is a risk of stifling blockchain innovation by imposing excessive regulatory burdens and impediments. The inclusion of digital assets within the scope of the rule without providing clear guidance on their unique characteristics and the challenges they present undermines the ability of investment advisers to fully leverage their potential. One particular concern is in relation to the application of the rule to crypto assets and the difficulty in demonstrating exclusive control. Given the unique nature of blockchain technology, which is designed to be decentralized and distributed, absolute control over digital assets can be challenging to establish. This raises questions about how investment advisers can effectively comply with the proposed rule without hindering the use and development of digital assets. I commend the SEC's efforts to enhance the protection of client assets and ensure investor confidence. However, it is crucial that any regulatory measures taken do not inadvertently impede the growth of blockchain innovation. The SEC should strive to strike a balance between safeguarding client assets and fostering technological advancements in order to fully realize the potential benefits of blockchain-based financial systems. I urge the SEC to consult with industry experts, actively engage with stakeholders, and thoroughly evaluate the potential impact of the proposed rule on blockchain innovation. By incorporating industry feedback and taking a nuanced approach, the SEC can achieve the intended investor protections while supporting the growth of this emerging technology. In conclusion, I respectfully request that the SEC carefully consider the potential negative impact of the proposed rule on blockchain innovation. By taking a forward-thinking and flexible approach, the SEC can promote a vibrant and well-regulated environment that encourages innovation, investor protection, and economic growth. Thank you for your attention to this matter, and I appreciate the opportunity to provide my thoughts on the proposed rule. Should you require any further information or clarification, please do not hesitate to contact me. Sincerely, Davoud Ibarra