Oct. 27, 2023
Dear SEC, I am writing to offer my public comment on the proposed rule "Safeguarding Advisory Client Assets" (File No. S7-05-20) from the Securities and Exchange Commission. While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe there are certain areas that require further consideration and refinement. One area of concern is the inadequate consideration of the unique properties of cryptocurrency within the proposed rule. The SEC's failure to fully account for the decentralized nature and technological complexities of cryptocurrency has resulted in regulatory requirements that are impractical and excessive. This approach risks stifling innovation and hindering the growth of this transformative technology in the financial sector. Digital assets, such as cryptocurrency, have the potential to revolutionize traditional financial systems and drive economic growth. However, they operate using decentralized networks and rely on cryptographic principles to secure transactions. These inherent characteristics make the traditional concept of custody, as defined by the SEC's proposed rule, incompatible and impractical for digital assets. It is crucial for the SEC to acknowledge these differences and tailor regulatory requirements that are suitable for the unique nature of digital assets. Instead of imposing a one-size-fits-all approach, the SEC should consider industry best practices and consult with stakeholders to develop a regulatory framework that effectively addresses the concerns specific to digital assets. This collaborative approach will ensure that investor protections are upheld while minimizing the compliance burden on investment advisers and qualified custodians. Furthermore, the proposed rule should strive to strike a balance between safeguarding client assets and encouraging innovation in the digital asset space. Excessive and onerous regulatory requirements can deter investment advisers from offering digital asset solutions to their clients, limiting access to these potentially lucrative investment opportunities. The SEC should foster a regulatory environment that promotes responsible innovation and supports the growth of this emerging sector. In conclusion, I urge the SEC to reevaluate the regulatory requirements imposed on digital assets within the proposed rule "Safeguarding Advisory Client Assets." It is essential to consider the unique properties and technological complexities of cryptocurrency when formulating rules and regulations. By doing so, the SEC can ensure that investor protections are maintained while fostering innovation and growth in the digital asset space. Thank you for considering my comments. I hope that the SEC will carefully review and address these concerns to create a more effective and balanced regulatory framework. Sincerely, Sunny Ali