Oct. 31, 2023
Dear Secretary, I am writing to provide a comment on the proposed rule, "Safeguarding Advisory Client Assets," as outlined in Release No. IA–6240. I appreciate the SEC's commitment to investor protection and the ongoing efforts to enhance the regulatory framework in the ever-evolving financial landscape, particularly concerning cryptocurrency assets. While I acknowledge the need for prudent safeguards and oversight within the cryptocurrency space, I wish to express my concerns regarding the proposed modification to the "any other entity" provision under the current custody rule. Specifically, my concern centers on the potential broad and overreaching nature of this modification, which could inadvertently impede the rights of individuals to custody their own cryptocurrency assets and interact with protocols and private custody solutions without the undue burden of compliance. Cryptocurrency assets represent a unique asset class with distinct characteristics. Self-custody, or individual control of private keys, is a fundamental aspect of the cryptocurrency ethos. It provides individuals with a level of autonomy, security, and personal responsibility that aligns with the decentralized nature of blockchain technology. Cryptocurrency users often choose to custody their assets independently, using secure wallets and engaging with decentralized protocols, decentralized finance (DeFi) platforms, and private custody solutions. The "any other entity" modification, as currently proposed, may inadvertently encompass individuals who are self-custodying their cryptocurrency assets. While the intention behind this modification may be to ensure oversight and protection for investors, it risks discouraging individuals from engaging with decentralized systems and exercising their right to manage their own digital assets. I would like to advocate for a balanced approach that distinguishes between institutional custody and individual self-custody of cryptocurrency assets. Institutional custody providers should undoubtedly adhere to stringent regulatory standards to ensure the safety of client funds. However, individual cryptocurrency users who self-custody their assets should not be subjected to the same level of regulatory oversight and compliance requirements as large financial institutions. I propose that the SEC consider defining clear and reasonable thresholds that differentiate between institutional entities and individuals in the context of cryptocurrency custody. This would allow individuals to maintain their personal custody rights and interact with protocols and private custody solutions without the fear of inadvertently coming out of compliance. Furthermore, I urge the SEC to engage in a collaborative dialogue with cryptocurrency industry stakeholders to develop a framework that strikes the right balance between safeguarding investor interests and preserving individual rights to self-custody cryptocurrency assets. This collaborative approach will help ensure that the regulatory framework remains adaptable and responsive to the unique challenges posed by digital assets. In conclusion, I appreciate the SEC's dedication to investor protection and the careful consideration of proposed amendments to the custody rule. I believe that a thoughtful and balanced approach to cryptocurrency custody regulation can help achieve the dual objectives of safeguarding assets and preserving individual rights. I look forward to continued discussions and collaboration on this matter. Thank you for considering my comments. I am at your disposal for any further discussions or information you may require. Sincerely,