Fidelity Investments, America’s third-largest asset manager, has called on the U.S. Securities and Exchange Commission (SEC) to continue developing the regulatory framework for integrating crypto assets into existing market structures, particularly around alternative trading systems (ATS).
In a letter submitted to the SEC’s Crypto Task Force on Friday, the company managing $5.9 trillion in assets said that it broadly supports the agency’s efforts to adapt legacy frameworks to emerging technologies, while emphasizing the need to preserve core principles such as investor protection, transparency, and market integrity.
Fidelity outlined four key recommendations that it believes are critical for the SEC to develop a comprehensive regulatory framework, especially for governing tokenized securities on ATS platforms.
$5.9 Trillion Asset Manager Fidelity Urges SEC
The first recommendation is continued regulatory development for broker-dealers engaging with crypto assets. The firm pointed to a recent SEC guidance clarifying that broker-dealers may custody both crypto asset securities and non-security digital assets, calling it a “welcome step,” while noting that further clarity is still needed for trading and custody practices.
“We look forward to additional guidance on a number of other areas critical for broker-dealers to offer, custody, and trade crypto assets, and facilitate crypto-security trading pairs,” said Fidelity.
The firm urged the Commission to provide “brightline standards” that would permit ATSs to facilitate secondary-market trading in tokenized securities created by third parties. The letter noted that this clarity is critical because the regulatory status of a tokenized instrument depends on its “economic realities,” and key facts that may not be fully understood by a broker-dealer.
Tokenized instruments have varying issuance structures, legalities, and valuation models, the letter said, and are subject to the same banking capital requirements as the underlying assets they hold. For example, real-world assets (RWAs), a type of tokenized security, span across different asset classes, such as equities, real estate, bonds, and private credit.
The company said that broker-dealers must be able to rely on how a tokenized asset is classified. In some models, the crypto asset represents a holder’s “indirect interest” in the underlying security through a securities entitlement, while in others the crypto asset may constitute a more complex instrument like a securities-based swap, which may only be offered to eligible contract participants, the letter said.
It also called for confirmation that tokenized versions of traditional securities should generally carry the same regulatory status as their underlying assets, which could help reduce fragmentation between on-chain and traditional markets.
Fidelity Wants Better CEX-DEX Coordination and Adoption of Blockchain Tech by Broker-Dealers
Fidelity’s general counsel, Roberto Braceras, urged the SEC to bridge the regulatory gap between centralized (CEX) and decentralized (DEX) exchanges to consider how “intermediated and disintermediated” trading venues can “evolve and coexist.”
This includes overhauling existing reporting rules to reflect that decentralized finance (DeFi) trading platforms and other disintermediated systems cannot produce the detailed financial reporting otherwise required by the SEC, as there is no central authority managing the venues. The company believes the overhaul removes the “undue burden” from decentralized systems.
Fidelity also recommended that the SEC allow broker-dealers to use blockchain technology for recordkeeping and clarify that facilitating on-chain settlement would not classify them as clearing agents. While blockchain-based platforms offer perks such as faster settlement, lower costs, and increased transparency, the firm noted that they may lack the safeguards imposed on regulated intermediaries, such as banks and clearing agencies.
