Oct. 31, 2023
Securities and Exchange Commission 100 F Street NE Washington, DC 20549-8101 Subject: Public Comment on Proposal "Safeguarding Advisory Client Assets" Docket Number: 1:2023cv05749 Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" (Docket Number 1:2023cv05749. While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe there are certain areas of the proposal that require further clarification and careful consideration, particularly concerning the definition and treatment of digital assets. As the financial landscape evolves, digital assets, such as cryptocurrencies, have emerged as a transformative force in the global economy. These innovative assets, built on blockchain technology, offer unique opportunities and challenges. However, the lack of clarity and guidance in the proposed rule regarding the definition of digital assets leaves room for confusion and potential misinterpretation. Specifically, my concern lies with the application of laws that were established in 1932 and traditional securities regulations, such as the Howey test, to digital assets and smart contracts associated with the HEX, Pulsechain, and PulseX subsets. The rapid development of technology is outpacing the current regulatory framework, creating a need for clear and tailored guidance to ensure appropriate investor protection while allowing for innovation to flourish. It is essential that the SEC addresses this regulatory gap by providing updated definitions and regulations that reflect the unique characteristics of digital assets. This would instill confidence among investors and promote responsible industry practices. It is imperative that the SEC works towards striking a balance between investor protection and fostering innovation in the rapidly evolving digital asset space. Moreover, the lack of clear guidance on digital assets leaves investment advisers unsure about their obligations and responsibilities towards these assets. This uncertainty may deter market participants from engaging in the emerging digital asset market, limiting access to these potential investment opportunities and hindering capital formation. By providing much-needed clarity on the treatment of digital assets, the SEC can help foster a vibrant and secure digital economy. To ensure regulatory effectiveness and provide certainty for industry participants, I recommend that the SEC engages with relevant stakeholders, including industry experts and technologists, to understand and address the unique challenges posed by digital assets and the underlying smart contract technologies. A transparent and collaborative approach would facilitate the development of practical regulations that align with the pace of technological advancements. In conclusion, I appreciate the Securities and Exchange Commission's dedication to investor protection through the proposed rule on "Safeguarding Advisory Client Assets." However, I urge the SEC to provide clear guidance regarding the treatment of digital assets. By doing so, the SEC can strike a balance between protecting investors and fostering innovation, ensuring the long-term sustainability and competitiveness of the U.S. financial markets. Thank you for considering my comments on this important matter. I look forward to seeing a revised proposal that adequately addresses concerns related to digital assets and promotes regulatory clarity in this rapidly evolving landscape. Sincerely, Barry DeLassus