Fidelity Pushes SEC for Clearer Crypto and Tokenized Securities Rules

TLDR

• Fidelity Investments wrote to the SEC urging clearer rules for broker-dealers to offer, custody, and trade crypto assets
• The letter focused on alternative trading systems (ATS) and how they should handle tokenized securities
• Fidelity wants the SEC to set standards that let ATS platforms trade tokenized securities from third parties
• The firm called for updated reporting rules that account for decentralized platforms lacking a central authority
• US banking regulators confirmed tokenized securities face the same capital rules as the underlying traditional assets

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Fidelity Investments has written to the US Securities and Exchange Commission calling for clearer rules around crypto assets and tokenized securities. The letter was sent Friday to the SEC’s Crypto Task Force.

The letter responded to a request from SEC Commissioner Hester Peirce in December. Peirce had asked for input on how national securities exchanges and alternative trading systems should handle crypto trading.

Fidelity said it broadly supports the SEC’s efforts to update existing rules for new technology. But it said more guidance is still needed in several key areas.

The firm outlined four main recommendations in its letter. The first was continued rule development for broker-dealers that work with crypto assets.

Fidelity welcomed recent SEC guidance that confirmed broker-dealers can hold both crypto securities and non-security digital assets. It said this was a step forward, but more clarity is still needed on trading and custody practices.

Tokenized Securities Need Clear Standards

A large portion of the letter focused on tokenized securities. These are traditional assets like stocks, bonds, real estate, and private credit that are issued or tracked on a blockchain.

Fidelity said the SEC should set clear rules that let ATS platforms trade tokenized securities created by outside parties. It said broker-dealers need to know how a tokenized asset is classified without taking on excessive legal risk.

The firm also asked the SEC to confirm that tokenized versions of traditional securities should carry the same regulatory status as the original assets. This could help reduce confusion between on-chain and traditional markets.

Fidelity’s general counsel Roberto Braceras wrote that the SEC should consider how centralized and decentralized trading venues can operate alongside each other.

Decentralized finance platforms cannot meet the same reporting requirements as traditional exchanges because there is no central authority. Fidelity said current rules create an unfair burden on these systems.

Blockchain Recordkeeping and Banking Rules

Fidelity also asked the SEC to allow broker-dealers to use blockchain technology for recordkeeping. It said the SEC should confirm that using on-chain settlement would not make a broker-dealer subject to clearing agency rules.

SEC Chairman Paul Atkins has signaled support for 24/7 capital markets and has allowed firms to experiment with tokenized trading.

Separately, three US banking regulators published a joint statement in March. The Federal Reserve, the FDIC, and the OCC said tokenized securities are subject to the same capital requirements as the assets they represent.

The agencies stated that the technology used to issue or trade a security does not change how it is treated for capital purposes.

Peirce has encouraged firms exploring tokenization to engage directly with regulators, marking a shift from previous enforcement-heavy approaches.

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