Oct. 28, 2023
October 15, 2023 Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Subject: Comments on Proposed Rule - Safeguarding Advisory Client Assets (File No. S7-12-23) Dear Sir/Madam, I am writing to provide my comments and concerns regarding the Proposed Rule on Safeguarding Advisory Client Assets. I appreciate the Securities and Exchange Commission's (SEC) efforts to enhance investor protections and address gaps in the custody rule. However, I believe there are areas of the proposal that require further clarification and consideration, specifically in relation to the definition and treatment of digital assets. Digital assets, such as cryptocurrencies, have emerged as an innovative and transformative force in the financial industry. However, the proposal does not provide clear guidance on what constitutes a digital asset, leading to confusion and potential misinterpretation. It is crucial for the SEC to establish a comprehensive and precise definition of digital assets to ensure proper regulation and investor protection. Without this clarity, investment advisers may struggle to comply with the proposed rule effectively, leading to unintended consequences and potential harm to investors. Furthermore, the SEC should recognize the unique characteristics and challenges presented by digital assets and address them adequately within the proposed rule. The rapid pace of technological advancement in the digital asset ecosystem requires flexible regulations that can adapt to changing circumstances. Failing to account for the distinct nature of digital assets may hinder innovation and create unnecessary barriers for investment advisers and market participants. Alongside ensuring clarity and adaptability in regulating digital assets, the SEC should consider the potential benefits that arise from incorporating these assets into the existing regulatory framework. The adoption of digital assets in investment portfolios can enhance diversification and potentially increase returns for investors. Regulating this space effectively, without stifling innovative practices, is crucial to harnessing the full potential of digital assets. Additionally, the economic analysis presented in the proposal should carefully weigh the costs and benefits associated with the treatment of digital assets. As the digital asset market continues to evolve, the economic impact of the proposed rule should be assessed with an understanding of the potential of these assets to contribute to market efficiency and capital formation. In conclusion, I appreciate the SEC's commitment to investor protection and recognition of the need to address the safeguarding of client assets through the proposed rule. However, it is imperative for the SEC to provide clarity and guidance regarding the treatment and regulation of digital assets within the proposed rule. This will help foster innovation, promote investor confidence, and ensure a robust and resilient financial system. Thank you for considering my comments. Sincerely,