Oct. 23, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed rule titled "Safeguarding Advisory Client Assets." While I appreciate the aim of enhancing investor protections and addressing gaps in the custody rule, I believe there are certain issues that need to be carefully reconsidered for the sake of both market efficiency and cross-border transactions. One specific area of concern is the treatment of digital assets, including cryptocurrencies, within the proposed rule. It is important to acknowledge that digital assets, built on blockchain technology, are radically transforming the financial landscape. However, the proposal does not adequately address the unique regulatory challenges posed by these assets. As a result, there is a risk of regulatory fragmentation and hindered cross-border transactions. One key concern is the potential compliance costs associated with the proposed rule. Digital assets operate on a global scale, and it is crucial to align regulatory standards with international best practices. Failing to do so may burden investment advisers with unnecessary compliance costs that could ultimately restrict innovation and impede the growth of this promising asset class. It would be wise to consider global regulatory standards to ensure consistency and avoid creating barriers to international transactions. In addition, the proposal should provide clearer guidance on the treatment of digital assets. The innovative nature of these assets requires a flexible and adaptable regulatory framework that promotes investor protection without stifling market growth. This includes establishing guidelines for custodial controls and demonstrating exclusive control of digital assets. A thoughtful approach is necessary to strike the right balance between safeguarding client assets and enabling the robust development of this evolving market. Furthermore, the proposed rule should be mindful of the benefits that digital assets can bring to investors. These assets have the potential to increase efficiency and promote capital formation. By embracing innovation and providing a clear regulatory framework, the SEC can encourage prudent investment in digital assets while simultaneously safeguarding investor interests. To address these concerns, I propose that the SEC collaborates with international regulatory bodies to establish consistent global standards for the treatment of digital assets. This would ensure that investment advisers can navigate the complex regulatory landscape while fostering cross-border transactions. Additionally, the SEC should consider establishing a dedicated working group composed of industry experts, technologists, and legal professionals to provide ongoing guidance and adapt the proposed rule to the rapidly evolving digital asset market. In conclusion, I urge the SEC to reconsider and fine-tune the proposed rule regarding the treatment of digital assets to ensure the alignment with international regulatory standards. By doing so, the SEC can bolster investor protection, encourage market efficiency, and promote the growth of the digital asset ecosystem. Thank you for considering my comments. If there are any further areas of concern or questions regarding this proposal, please do not hesitate to reach out to me. Sincerely, Elias Elsuradi