Oct. 25, 2023
Dear Secretary, I am writing to provide my public comment on the proposed rule, "Safeguarding Advisory Client Assets," by the Securities and Exchange Commission (SEC). This rule addresses the important issue of protecting client assets and enhancing investor safeguards. While I recognize the intention behind the proposed rule, I have concerns regarding its potential negative impacts on market liquidity for digital assets and the challenges posed by regulatory uncertainties surrounding cryptocurrencies. The proposed rule expands the coverage to include a broader range of investments held in a client's account, which is a step in the right direction. However, when it comes to digital assets or cryptocurrencies, the regulatory landscape is still uncertain and evolving. This lack of clarity could hinder market liquidity for digital assets, making it more challenging for investors to buy and sell these assets. Digital assets, built on blockchain technology, are transforming the financial industry by introducing efficiency, transparency, and accessibility. However, due to their unique nature, traditional custody solutions may not be directly applicable to digital assets. The proposed rule should provide more guidance on how investment advisers should safeguard and custody these assets to ensure flexibility without compromising investor protections and market liquidity. We must strike a balance between safeguarding client assets and fostering innovation in the digital asset space. The proposed rule should aim to provide regulatory clarity and establish best practices for investment advisers dealing with digital assets. This will not only ensure investor protection but also encourage market participants to adopt secure and efficient custody solutions for digital assets. Additionally, it is crucial to address the regulatory uncertainties surrounding cryptocurrencies. The SEC should work towards providing clear definitions and guidance on the regulatory treatment of various types of digital assets. This will help create a more predictable and stable regulatory environment, allowing investment advisers to navigate the digital asset space with confidence. Moreover, I encourage the SEC to consider the potential unintended consequences of the proposed rule on market liquidity. Excessive regulation and burdensome custody requirements may deter investment advisers from engaging with digital assets, hampering their broader adoption and the development of a more liquid digital asset market. In conclusion, while I appreciate the SEC's efforts to enhance investor protections through the proposed rule, I urge the commission to carefully consider the potential negative effects on market liquidity for digital assets and address the regulatory uncertainties surrounding cryptocurrencies. Clear guidelines and flexible custody solutions are vital for supporting innovation in the digital asset space while ensuring adequate investor safeguards. Thank you for considering my comments. I hope that they will contribute to the ongoing discussion on this crucial matter. Sincerely, Jakub Kilan