Oct. 30, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule titled "Safeguarding Advisory Client Assets." While I understand that the Securities and Exchange Commission aims to enhance investor protections and address gaps in the custody rule, I believe that certain aspects of the proposed rule may have unintended consequences and may not adequately address the evolving landscape of digital assets, such as cryptocurrencies. Digital assets, including cryptocurrencies, have revolutionized the financial industry through the use of blockchain technology. However, regulatory uncertainties surrounding digital assets continue to present challenges. Under the proposed rule, digital assets are subject to the same stringent requirements as traditional assets, without taking into account the unique characteristics of digital assets. One of my key concerns is the potential loss of privacy and autonomy over my financial assets. Cryptocurrencies are designed to provide individuals with a decentralized and private means of transacting value. Implementing stringent regulations without carefully considering the privacy implications could undermine the fundamental principles that make cryptocurrencies attractive to many users. Furthermore, the proposed rule does not adequately address the challenges in demonstrating exclusive control over digital assets. Unlike traditional assets held by a qualified custodian, the nature of blockchain technology means that control over digital assets is more nuanced and multifaceted. It is essential that any regulations in this space account for the unique aspects of digital asset custody and find ways to strike a balance between investor protection and the ongoing innovation in digital finance. Additionally, I am concerned about the overall impact of the proposed rule on the efficiency and competition within the advisory industry. While investor protection is of paramount importance, it is crucial to consider the potential unintended consequences of excessive regulatory burdens. Excessive compliance costs could disproportionately affect small entities and limit their ability to compete with larger players in the market. In light of these concerns, I would like to propose the SEC consider the following: 1. Work towards developing a framework that takes into account the unique characteristics of digital assets and balances investor protection with privacy rights. 2. Engage in a meaningful dialogue with industry stakeholders to gain a deeper understanding of the technological advancements and challenges inherent in the custody of digital assets. 3. Explore alternative solutions that provide investor protection while ensuring that regulatory initiatives do not stifle competition and innovation in the advisory industry. To conclude, while I appreciate the SEC's efforts to safeguard advisory client assets, I urge careful consideration of the impact of the proposed rule on the digital asset landscape and the importance of balancing privacy, innovation, and investor protection. I remain committed to collaborating with the SEC and other relevant stakeholders to ensure that any regulatory changes reflect the evolving needs of the industry and promote a fair and secure environment for all market participants. Thank you for considering my comments. Sincerely, Michael Lucian Primerose