Oct. 28, 2023
Dear Securities and Exchange Commission, I am writing as a concerned U.S. citizen with regards to the proposed rule titled "Safeguarding Advisory Client Assets". While I appreciate the SEC's aim to enhance investor protections and address gaps in the custody rule, there are several areas where I believe the proposed rule may fall short and require further consideration and clarification. Firstly, I am particularly concerned about the inadequate consideration of smart contracts in the proposed rule. The advancements in blockchain technology have ushered in a new era of financial innovation, with digital assets such as cryptocurrency gaining prominence. However, the proposal does not adequately address the unique characteristics of smart contracts, leading to regulatory challenges and potential legal uncertainties. Smart contracts have the potential to revolutionize the way investment advisers handle client assets, and it is crucial that the SEC develops a comprehensive framework that encompasses the intricacies of these digital assets. Additionally, the rule's treatment of digital assets or cryptocurrencies warrants closer examination. The rule briefly mentions the application of the safeguarding requirements to crypto assets, but it fails to provide clear guidelines on how investment advisers should effectively safeguard these assets. Given the rapid growth and evolving nature of the crypto market, regulatory uncertainties currently pose significant challenges for both investment advisers and investors. It is of utmost importance that the SEC provides clearer guidelines and establishes appropriate measures to minimize risks and promote investor protection in this emerging field. Moreover, I would like to emphasize the need for stronger oversight and regulation of custodians in the digital asset space. The proposal acknowledges the challenges in demonstrating exclusive control over crypto assets, but it does not provide sufficient guidance on how investment advisers can effectively safeguard these assets when stored with custodians. The SEC should work towards developing comprehensive guidelines that address these challenges and ensure the appropriate protection of client assets in the digital asset realm. In conclusion, while I appreciate the SEC's efforts to enhance investor protections, I firmly believe that the proposed rule requires further consideration and clarification in relation to the treatment of smart contracts and digital assets. The SEC should strive to create a regulatory framework that not only keeps pace with technological advancements but also effectively safeguards client assets and promotes investor confidence. I encourage the SEC to take these concerns into account during the rulemaking process, and I look forward to seeing a more comprehensive and robust rule that addresses these critical issues. Sincerely, A Concerned U.S. Citizen