Oct. 31, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets," specifically in regards to the lack of clarity surrounding the definition of digital assets. While I appreciate the Securities and Exchange Commission's efforts to address the safeguarding of client assets, it is essential to provide clear guidance on what constitutes a digital asset to avoid confusion and potential misinterpretation. Digital assets, particularly cryptocurrencies, have emerged as transformative elements in the finance industry. The rapid growth and adoption of blockchain technology have led to the development of innovative financial instruments and decentralized networks. However, these advancements have also introduced regulatory uncertainties, raising the need for well-defined guidelines and frameworks. One particular concern I have is regarding the application of previous securities laws and the Howe test to smart contracts within the Hex, Pulsechain, and PulseX systems. These systems utilize blockchain technology to facilitate financial transactions and execute decentralized protocols. However, their unique structure challenges the traditional understanding of securities laws and may fall outside the purview of existing regulations. To ensure investor protection and promote regulatory clarity in this evolving landscape, it is crucial for the Securities and Exchange Commission to provide clear guidance on how digital assets and smart contracts are classified and governed. Failing to address this concern adequately may hinder innovation, discourage investment, and impede the growth of emerging technologies. Furthermore, it is important to consider the complexities and intricacies of digital assets when formulating regulatory frameworks. Cryptocurrencies and other digital assets operate in a decentralized manner, where ownership and control are not necessarily tied to a centralized authority or custodian. This decentralized nature poses unique challenges when it comes to safeguarding client assets. Therefore, it is essential to strike the right balance between investor protection and regulatory requirements. I urge the Securities and Exchange Commission to engage in thorough consultations with industry experts, blockchain technologists, and market participants to ensure that any regulatory framework developed addresses these concerns adequately. By fostering an open dialogue and considering the specific characteristics of digital assets, the Commission can create a regulatory environment that safeguards investor interests while still allowing for innovation and development. In conclusion, I believe that the proposed rule "Safeguarding Advisory Client Assets" should provide clear guidance on the definition and regulation of digital assets. Only through a well-defined framework can we ensure investor protection, promote innovation, and harness the potential benefits of blockchain technology. I appreciate the opportunity to provide feedback and hope that my concerns are taken into careful consideration. Sincerely, Suzanne DeCann