Oct. 22, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on the safeguarding of advisory client assets. While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I have identified several issues that need further consideration. In particular, I believe there is inadequate consideration of smart contracts and digital assets. Smart contracts, as implemented on blockchain technology, have revolutionized the finance industry. These digital agreements have the potential to streamline transactions and increase transparency. However, the SEC's proposal does not adequately address the unique characteristics of smart contracts, leading to regulatory challenges and potential legal uncertainties. Digital assets, including cryptocurrencies, have also emerged as a significant component of investment portfolios. The growing popularity of these assets necessitates a comprehensive regulatory framework that recognizes their unique properties. Unfortunately, the proposal fails to provide clear guidelines for the safeguarding and custody of digital assets, leaving investors vulnerable to potential risks. Furthermore, the proposal's broad scope lacks the necessary specificity for addressing digital assets. The SEC should consider providing clear definitions of digital assets to ensure consistent application of the rules across the industry. By establishing precise criteria and classifications, investors and advisers can navigate their obligations more effectively. To address these concerns, I suggest the SEC consider collaborating with industry experts and stakeholders to develop guidance specifically tailored to smart contracts and digital assets. This collaboration would enable the SEC to gain a comprehensive understanding of the challenges and risks associated with these emerging technologies. Moreover, the SEC should explore the international regulatory landscape to align its approach with global standards. With digital assets crossing borders seamlessly, it is crucial to establish consistent regulations to foster innovation while safeguarding investor interests. In conclusion, I urge the SEC to reconsider and include robust provisions in the final rule that address the unique features and challenges posed by smart contracts and digital assets. By doing so, we can achieve a regulatory framework that facilitates innovation and safeguards investor protection. Thank you for considering my concerns. I appreciate the opportunity to provide input on this significant proposal. Sincerely