Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets," specifically the lack of clarity on the definition of digital assets. In today's rapidly evolving financial landscape, digital assets, such as cryptocurrencies, have emerged as a transformative force. These assets, built on blockchain technology, offer potential benefits such as increased efficiency, transparency, and accessibility. However, they also come with unique challenges, particularly in terms of regulation and safeguarding investor assets. While the proposed rule acknowledges the need to address digital assets, it fails to provide clear guidance on what constitutes a digital asset. This lack of clarity can lead to confusion and potential misinterpretation by investment advisers, which may result in inconsistent practices and inadequate investor protection. To effectively safeguard client assets invested in digital assets, it is crucial that the regulatory framework provides a precise definition of these assets. This would help establish a common understanding among all stakeholders and foster a consistent approach to their treatment. Additionally, the proposed rule should consider the unique characteristics and risks associated with digital assets. The decentralized nature of blockchain-based assets and the absence of a central authority require innovative approaches to custody and security. Without targeted guidance, investment advisers may struggle to implement adequate safeguarding measures, putting client assets at risk. To address these concerns, the SEC should collaborate with industry experts and stakeholders to develop a comprehensive and clear definition of digital assets. This definition should encompass various types of cryptocurrencies, tokens, and other blockchain-based assets, taking into account their distinct features and functionalities. Furthermore, the SEC should provide guidance on best practices for the custody and security of digital assets. This should include requirements for qualified custodians and measures to ensure comprehensive and robust security protocols. By establishing a clear regulatory framework, the SEC can promote investor confidence in digital assets while mitigating potential risk factors. In conclusion, the proposed rule "Safeguarding Advisory Client Assets" must address the lack of clarity surrounding the definition of digital assets. Innovation in financial technology should be embraced, but without precise regulatory guidance, investor protection and market stability may be compromised. I urge the SEC to work with industry experts to develop a clear definition and comprehensive safeguards for digital assets. Thank you for considering my concerns. I believe that by addressing these issues, the SEC can contribute to the development of a thriving and secure digital asset market. Sincerely, Rachel O. Wills