Oct. 31, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the "Safeguarding Advisory Client Assets" proposal. While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, I believe there are several issues that should be carefully considered before implementing this proposal. Firstly, it is evident that the SEC lacks sufficient expertise in digital assets and cryptocurrency. This becomes apparent when examining the proposal's implications on the unique characteristics of the industry. The SEC's failure to fully understand digital assets and their associated technologies may lead to impractical or ineffective regulations. It is essential that the SEC engages industry experts who possess the necessary knowledge and experience to ensure regulations do not stifle innovation and hinder the growth of this burgeoning ecosystem. Furthermore, the proposed regulations seem to lack clarity and coherence, particularly when addressing decentralized finance (DeFi) transactions. By imposing reporting requirements on numerous participants in DeFi, the SEC risks generating multiple, inconsistent reports for the same transaction. This not only introduces confusion but also hampers compliance efforts, creating needless burdens for industry actors. Clear guidelines and streamlined reporting mechanisms are needed to avoid unnecessary complexities and ensure regulatory efficiency. Additionally, I am concerned about the outdated nature of existing laws, specifically the Securities Act of 1933 and the Howey Test, which the SEC relies upon to determine whether assets qualify as securities. While these laws were designed for traditional securities, they do not appropriately apply to present digital assets and smart contracts in the crypto space, such as HEX or PULSECHAIN or PULSEX. The landscape has evolved significantly, necessitating a reevaluation of existing frameworks to accurately classify and regulate these new innovative instruments. In conclusion, while I support the SEC's goal of protecting investors, it is crucial that the proposed rule be reconsidered in light of the concerns raised. I urge the SEC to collaborate with industry leaders and experts to establish a comprehensive understanding of digital assets and cryptocurrency, facilitating the development of regulations that promote innovation while safeguarding investors' interests. Thank you for considering my public comment. Sincerely, David Solaris