TLDR
- Fidelity Investments submitted a formal request to the SEC for comprehensive guidelines enabling broker-dealers to custody, trade, and offer digital assets
- The correspondence highlighted alternative trading systems (ATS) and their operational requirements for tokenized securities
- Fidelity advocates for regulatory standards allowing ATS platforms to facilitate trading of externally-issued tokenized securities
- The investment firm requested revised reporting frameworks that accommodate decentralized platforms operating without centralized oversight
- Federal banking authorities clarified that tokenized securities must comply with identical capital requirements as their traditional counterparts
Fidelity Investments has submitted a formal communication to the US Securities and Exchange Commission requesting comprehensive regulatory guidance for digital assets and blockchain-based securities. The correspondence was delivered Friday to the SEC’s Crypto Task Force.
https://twitter.com/CryptosR_Us/status/2035805563226038344?s=20
The submission came in response to an inquiry from SEC Commissioner Hester Peirce issued in December. Peirce had solicited industry feedback regarding operational frameworks for national securities exchanges and alternative trading systems managing cryptocurrency transactions.
Fidelity expressed general alignment with the SEC’s initiative to modernize regulatory frameworks for emerging technologies. However, the firm emphasized that significant gaps in guidance persist across multiple critical areas.
The investment company presented four primary policy recommendations in its submission. The initial priority centered on advancing regulatory development for broker-dealers operating within the digital asset ecosystem.
Fidelity acknowledged recent [[LINK_START_0]]SEC[[LINK_END_0]] guidance confirming that broker-dealers possess authority to maintain both crypto securities and non-security digital assets. While recognizing this as progress, the firm stressed that additional clarity remains essential for trading operations and custody protocols.
Tokenized Securities Require Definitive Regulatory Framework
A substantial segment of the correspondence addressed tokenized securities. These digital representations encompass traditional financial instruments including equities, debt obligations, real estate holdings, and private credit arrangements recorded on distributed ledger technology.
Fidelity urged the SEC to establish definitive parameters enabling ATS platforms to facilitate trading of tokenized securities originated by third-party issuers. The firm emphasized that broker-dealers require certainty regarding asset classification without assuming disproportionate legal liability.
The organization additionally requested SEC confirmation that tokenized representations of conventional securities should maintain equivalent regulatory classification as their underlying assets. Such clarification could minimize market fragmentation between blockchain-based and traditional trading ecosystems.
Roberto Braceras, Fidelity’s general counsel, emphasized that the SEC should evaluate frameworks enabling centralized and decentralized trading infrastructure to function in parallel.
Decentralized finance platforms cannot satisfy identical disclosure obligations as conventional exchanges due to their absence of centralized governance. Fidelity contended that existing regulations impose disproportionate compliance burdens on these alternative systems.
Distributed Ledger Recordkeeping and Capital Requirements
Fidelity additionally requested SEC authorization for broker-dealers to leverage blockchain infrastructure for regulatory recordkeeping. The firm sought confirmation that utilizing on-chain settlement mechanisms would not trigger classification as a clearing agency under existing regulations.
SEC Chairman Paul Atkins has demonstrated support for continuous capital market operations and has permitted financial institutions to pilot tokenized trading initiatives.
In a separate development, three federal banking supervisors issued a collaborative statement in March. The Federal Reserve, the FDIC, and the OCC clarified that tokenized securities remain subject to capital requirements identical to the assets they digitally represent.
The regulatory agencies affirmed that the technological infrastructure utilized for security issuance or trading does not alter capital treatment protocols.
Peirce has actively encouraged institutions developing tokenization capabilities to maintain direct engagement with regulatory authorities, representing a departure from historically enforcement-focused regulatory strategies.
