Oct. 31, 2023
Adam Hill [REDACTED] October 31, 2023 Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-1090 Subject: Public Comment on Proposed Rule "Safeguarding Advisory Client Assets" Dear Sir/Madam, By way of this letter, I would like to raise my concerns regarding the proposed rule on "Safeguarding Advisory Client Assets" (the Proposal), as published by the Securities and Exchange Commission (SEC). While I commend the SEC's efforts to enhance investor protections and address gaps in the custody rule, I would like to bring your attention to the lack of clarity in defining digital assets, particularly cryptocurrencies, which has the potential to inadvertently hamper innovation and limit growth in the advisory industry. Digital assets, including cryptocurrencies, have emerged as a transformative force in the financial world, leveraging blockchain technology to revolutionize the way we transact and store value. However, the Proposal fails to provide clear guidance on what constitutes a digital asset, leading to confusion and potential misinterpretation by industry participants and regulatory bodies alike. One particularly concerning aspect is the application of outdated laws from 1932, specifically the Howey Test, to determine the classification of digital assets. The Howey Test, while well-suited for traditional securities, may not adequately capture the unique characteristics and functionalities of digital assets, such as those found within the HEX, PulseChain, and Pulsex communities. As a result, existing regulations may inadvertently stifle innovation and hinder the growth potential of these transformative technologies. In order to promote a fair and thriving advisory industry that embraces digital assets, it is imperative that the SEC provides clear and comprehensive guidance on the characteristics, functionality, and regulatory requirements surrounding these assets. Clarity is crucial for investment advisers, custodians, and market participants to navigate the evolving landscape and ensure compliance with the asset safeguarding provisions. Furthermore, I would urge the SEC to engage with industry stakeholders and experts to gather a wide range of perspectives and expertise. By fostering an open dialogue with the industry, regulators can better understand the unique complexities of digital assets and tailor regulations that strike a balance between investor protection and promoting innovation. In conclusion, as the advisory industry strives to adapt to the evolving digital landscape, it is vital that regulatory frameworks keep pace with technological advancements. By providing clear guidance on the definition and treatment of digital assets, the SEC can foster an environment that encourages responsible innovation, maintains investor confidence, and enhances market efficiency. I encourage the SEC to further examine and consider the concerns I have raised, ensuring that any final rule recognizes the changing dynamics of the advisory industry. Thank you for considering my comments and for your efforts in safeguarding client assets and improving the regulatory environment. I appreciate the opportunity to contribute to this important discussion. Sincerely, Adam Hill