Oct. 27, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule, "Safeguarding Advisory Client Assets." While I understand the importance of investor protection and the need for safeguards in the advisory industry, I believe that certain aspects of the rule may have a negative impact on investor access, particularly in relation to digital assets or cryptocurrencies. Digital assets, such as cryptocurrencies, have emerged as a transformative force in the financial industry. Blockchain technology, upon which these assets are built, has the potential to revolutionize finance by increasing transparency, reducing costs, and providing greater accessibility. However, one of the major challenges faced by the regulatory authorities is the uncertain regulatory landscape surrounding these assets. The proposed rule, in its current form, may restrict investor access to digital assets and limit their ability to participate in this emerging asset class. By expanding the coverage to include a broader range of investments held in a client's account, the rule introduces complexities and uncertainties that could hinder investors' ability to engage with cryptocurrencies. The rule's focus on exclusive control of assets and the challenges in demonstrating such control create additional barriers for investment advisers and their clients. Furthermore, the rule's requirements for safeguarding and maintaining certain assets with a qualified custodian may not be feasible for digital assets. The unique characteristics of cryptocurrencies, such as their decentralized nature and self-custodial options, make it challenging to comply with traditional custodial requirements. Imposing stringent custodial requirements on digital assets could stifle innovation and limit the potential benefits that these assets offer to investors. It is crucial to strike a balance between investor protection and fostering innovation in this rapidly evolving digital asset space. While I acknowledge the need for safeguards, it is essential to consider alternative approaches to regulating digital assets that are tailored to their unique characteristics. The rule should provide guidance and flexibility, rather than imposing onerous requirements that could hinder investor access and impede the growth of this emerging asset class. I urge the Securities and Exchange Commission to consider the potential negative impact of the proposed rule on investor access to digital assets. It is imperative to engage in a thorough and inclusive dialogue with industry participants and stakeholders to ensure that the regulatory framework strikes the right balance between investor protection and fostering innovation. Thank you for considering my concerns. I look forward to the opportunity for further discussion and collaboration on this important matter. Sincerely, Sunny Ali