Oct. 27, 2023
Dear Securities and Exchange Commission, I am writing today to express my concerns regarding the proposed rule "Safeguarding Advisory Client Assets". While I appreciate the SEC's efforts to enhance investor protections and address gaps in the custody rule, there are a few areas where I believe the proposal falls short, particularly regarding smart contracts and digital assets. Firstly, the proposal does not adequately consider the unique characteristics of smart contracts. Smart contracts are self-executing agreements with the terms of the agreement directly written into the code. They offer increased efficiency and transparency in financial transactions. However, the proposal does not offer clear guidance on how investment advisers should safeguard digital assets held through smart contracts. This lack of clarity could lead to regulatory challenges and potential legal uncertainties, ultimately hindering the growth and innovation of this emerging technology. Furthermore, the proposal's discussion of digital assets, such as cryptocurrencies, is limited and does not fully address the regulatory uncertainties surrounding these assets. Digital assets, built on blockchain technology, are transforming the financial industry and are gaining popularity among investors. However, the lack of comprehensive regulations creates an environment of uncertainty and potential risk. Without clear guidelines on how investment advisers should handle digital assets, we risk impeding their inclusion in mainstream investment portfolios and missing out on the potential benefits they offer. Moreover, the economic analysis provided by the SEC is crucial, but it falls short in addressing the potential impact of digital assets on efficiency, competition, and capital formation. Digital assets have the potential to increase the efficiency of investments and democratize access to capital. By harnessing the power of blockchain technology, these assets can reduce intermediaries and streamline transactions. However, the proposal's economic analysis does not fully explore these possibilities and assess their potential impact on the economy. A more comprehensive analysis in this regard would help policymakers and stakeholders make informed decisions. In conclusion, while I recognize the efforts made by the SEC in drafting the proposed rule "Safeguarding Advisory Client Assets," I urge you to pay special attention to the concerns I have raised regarding smart contracts and digital assets. It is crucial to address the regulatory challenges and uncertainties associated with these emerging technologies to ensure that investor protections are not compromised, and innovation is not stifled. A more comprehensive approach will not only enhance investor confidence but also harness the potential benefits that these technologies offer to our financial ecosystem. Thank you for considering my comments on this important matter. Sincerely, Sunny Ali