Fidelity Seeks Clearer SEC Guidance for Broker Dealers Handling Crypto Assets

TLDR

• Fidelity seeks clearer SEC rules for broker dealers handling crypto assets
• Firm calls for guidance on tokenized securities trading on ATS platforms
• Broker dealers need clarity on custody and crypto security trading pairs
• Fidelity supports blockchain use in recordkeeping and settlement processes
• Firm urges alignment between tokenized and traditional securities rules

Fidelity has called on the US Securities and Exchange Commission to clarify rules for broker-dealers handling crypto assets. The firm said clearer guidance is needed for custody, trading, and tokenized securities. It also urged support for blockchain systems and alternative trading platforms, as regulators work to integrate crypto into existing market structures while maintaining investor protection and transparency across markets.

Need for Clearer Broker-Dealer Guidance

Fidelity stated that broker-dealers require more regulatory clarity to offer, custody, and trade crypto assets. The firm addressed these concerns in response to a request for information from the SEC. It supported efforts by the agency’s Crypto Task Force to build a structured approach for digital assets.

The firm noted that existing securities laws already provide a strong base. These include the Securities Exchange Act and Regulation ATS. However, crypto assets introduce new operational challenges. Broker-dealers need guidance to manage these assets without facing legal uncertainty.

Fidelity said recent statements from SEC leadership have helped. It referenced guidance allowing broker-dealers to custody certain crypto assets. Still, it added that more direction is needed for trading and settlement processes. This includes support for crypto-security trading pairs.

Tokenized Securities and ATS Framework

Fidelity urged the SEC to issue clear standards for trading tokenized securities on alternative trading systems. These platforms are operated by broker-dealers and play a key role in secondary market trading. The firm said clarity is required because tokenized assets can have different legal classifications.

It explained that the classification depends on the economic structure of each token. In some cases, tokens represent ownership in a security. In others, they may qualify as securities-based swaps. This creates uncertainty for broker-dealers facilitating trades.

Fidelity stated that broker-dealers should be able to rely on how an asset is classified. This would reduce the risk of violating securities laws. It also called for confirmation that tokenized versions of securities should carry the same regulatory status as their underlying assets. The firm added that such alignment could reduce fragmentation. It may also improve efficiency between traditional and blockchain-based markets.

Balancing Traditional and Decentralized Markets

Fidelity addressed the interaction between intermediated and disintermediated trading venues. It noted that blockchain-based platforms can offer faster settlement and lower costs. They may also improve transparency and access.

However, these platforms may lack regulatory safeguards applied to traditional intermediaries. Fidelity said the SEC should consider how both systems can operate together. This includes evaluating risks such as price differences across platforms. The firm also suggested disclosure requirements for participants using decentralized platforms. This could help inform investors about potential risks. 

Fidelity said this approach would support broader market access. It recommended allowing blockchain use in recordkeeping, as current rules do not fully address distributed ledger systems. Updated guidance would help broker-dealers adopt new technologies. The firm also asked the SEC to confirm that facilitating on-chain settlement does not classify broker-dealers as clearing agencies under existing regulations.

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