Oct. 31, 2023
Dear Securities and Exchange Commission, I am writing to express my grave concerns regarding the proposed rule on "Safeguarding Advisory Client Assets." While I appreciate the SEC's intent to enhance investor protections and address gaps in the custody rule, I strongly believe that there are several issues that require urgent reconsideration. One key area that demands immediate attention is the arbitrary and unjust treatment of different types of digital assets. The proposed rules seem to adopt a discriminatory approach that treats various crypto assets inconsistently. This approach not only creates confusion but also provides room for potential regulatory arbitrage. In order to foster fair and equal market conditions, regulatory frameworks must offer clear and consistent guidelines that are unbiased towards specific crypto assets. The rapidly evolving digital asset market requires a technology-neutral framework that can adapt to the dynamic nature of these assets. Moreover, the proposed timeline for implementation is deeply unsettling. The rules are poised to take effect far too hastily, giving companies and protocols inadequate time to prepare and adjust their operations to comply with the new requirements. This rushed implementation could impose unbearable burdens on market participants who should be afforded sufficient time to evaluate, plan, and ensure smooth compliance. It is imperative to institute a phased approach that allows for thorough consultation and constructive feedback from the industry to minimize disruption and maintain market integrity. Another critical issue that warrants significant attention is the potential adverse impact of the proposed rules on the global landscape. The digital asset market is inherently global, and any regulatory framework must consider the implications for cross-border transactions and collaborations. Divergent regulatory approaches among different jurisdictions may lead to conflicting compliance demands and pose serious challenges for international coordination. It is crucial to engage in comprehensive consultation with international counterparts to develop harmonized global regulatory standards and prevent unintended consequences. Moreover, I would like to emphasize the need for a comprehensive and impartial cost-benefit analysis. While the proposed rule aims to enhance investor protections, it is crucial to assess the potential economic impact on all market participants, especially small entities. A thorough analysis of costs and benefits, including an examination of feasibility challenges and unintended consequences, is vital in making well-informed decisions that strike the right balance between protecting investors and fostering industry growth. In conclusion, I urgently request the SEC to reassess the discriminatory treatment of different crypto assets, provide a reasonable timeline for implementation, and carefully evaluate the potential impact of these rules on the international landscape. Additionally, a thorough cost-benefit analysis must be conducted to ensure the proposed rules achieve their stated objectives without unwarrantedly burdening market participants. I greatly appreciate the opportunity to provide these comments and trust that the SEC will thoroughly consider them. Sincerely, Levi Schneider