Fidelity Urges SEC on Crypto Broker-Dealer Rules

Fidelity Calls on SEC to Expand Crypto Broker-Dealer Framework – Focus on Tokenized Securities and Alternative Trading Systems

Key Takeaways

Fidelity Investments has urged the US Securities and Exchange Commission to further develop rules for broker-dealers handling crypto assets on alternative trading systems.
The company called for a comprehensive framework covering tokenized securities, including those issued by third parties.
Fidelity highlighted structural differences between tokenized real-world assets and other crypto instruments.
The asset manager also asked the SEC to address regulatory gaps between centralized and decentralized trading platforms.
US banking regulators have stated that tokenized securities are subject to the same capital requirements as their underlying assets.

Fidelity Responds to SEC Crypto Task Force on Broker-Dealer Rules

Fidelity Investments has formally asked the US Securities and Exchange Commission to continue refining the regulatory framework that governs how broker-dealers can offer, custody, and trade crypto assets. The request was made in a letter responding to a call for comments issued earlier in March by the SEC’s Crypto Task Force.

According to Fidelity, it is critical for the regulator to establish a comprehensive set of rules for tokenized securities trading. This includes not only tokenized instruments issued directly by market participants but also tokenized securities issued by third parties and traded on alternative trading systems, commonly referred to as ATS.

Alternative trading systems operate as regulated trading venues that differ from traditional exchanges. Fidelity’s letter focuses on how broker-dealers should be allowed to use these systems when dealing with crypto-based instruments and tokenized versions of traditional financial assets.

Tokenized Securities Require Clear and Specific Regulatory Treatment

In its submission, Fidelity emphasized that tokenized instruments vary significantly in their structure, legal characteristics, and valuation models. Tokenized real-world assets can represent different asset classes, including equities, real estate, bonds, and private credit.

The company noted that tokenization models differ in the rights they grant to holders. In some cases, a crypto asset may represent an indirect interest in an underlying security through what is described as a securities entitlement. In other cases, a tokenized instrument may qualify as a securities-based swap. Under existing rules, such swaps may only be offered to eligible contract participants.

By outlining these distinctions, Fidelity signaled that a single, generalized approach to crypto regulation may not sufficiently address the complexity of tokenized financial products. The company’s position is that clear and tailored rules would help broker-dealers understand how to structure offerings and comply with securities laws when listing or trading tokenized assets.

For market participants, including platforms that integrate tokenized instruments or rely on broker-dealer infrastructure, regulatory clarity directly affects how products can be structured and who can access them.

Bridging the Gap Between Centralized and Decentralized Trading Venues

Another central element of Fidelity’s letter concerns the regulatory differences between centralized trading platforms and decentralized finance systems.

Fidelity urged the SEC to consider how intermediated and disintermediated trading venues can evolve and coexist within the same regulatory environment. Centralized platforms typically operate under identifiable management structures and can comply with detailed reporting and recordkeeping requirements. Decentralized systems, by contrast, often lack a central authority capable of producing the type of financial reports currently required by the SEC.

The company argued that existing reporting rules should be updated to reflect this technological reality. According to the letter, decentralized platforms and other disintermediated systems cannot generate the same forms of detailed financial reporting because no single entity controls the system.

Fidelity also recommended that the SEC issue guidance allowing broker-dealers to use distributed ledger technology for alternative trading systems and other recordkeeping purposes. In its view, adapting reporting obligations to blockchain-based infrastructure would remove undue burdens from decentralized systems while maintaining regulatory oversight.

For crypto users and platforms operating in regulated markets, these discussions are relevant because reporting standards and infrastructure requirements determine how trading venues can legally function and what level of transparency regulators expect.

Regulators Maintain Capital Rules for Tokenized Assets

Fidelity’s request comes at a time when US regulators have signaled support for innovation in capital markets. Under SEC Chairman Paul Atkins, the agency has expressed openness to the concept of 24-7 capital markets and has approved certain experiments with tokenized trading.

At the same time, US banking regulators have clarified that tokenized securities are subject to the same capital treatment as their underlying assets. In a joint policy statement published in March by the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, the agencies stated that the technology used to issue or transact in a security does not generally change its capital requirements.

This means that whether an equity, debt instrument, real estate investment trust, or other asset is held in traditional form or as a tokenized representation, the same capital rules apply. For broker-dealers and financial institutions, this clarification establishes continuity between traditional securities regulation and tokenized markets.

Implications for Crypto Market Infrastructure

Fidelity is the third-largest asset manager in the United States, and its engagement with the SEC adds institutional weight to ongoing regulatory discussions around crypto market structure. The company’s focus on alternative trading systems, tokenized securities, and decentralized platforms highlights areas where traditional financial regulation intersects with blockchain-based infrastructure.

For international users evaluating crypto trading or tokenized asset exposure, developments in US regulatory policy can influence product availability, platform design, and compliance standards. Broker-dealer permissions, reporting obligations, and capital treatment rules shape how regulated entities participate in digital asset markets.

Our Assessment

Fidelity’s letter to the SEC centers on expanding and clarifying the regulatory framework for broker-dealers involved in crypto and tokenized securities trading. The company calls for detailed rules covering alternative trading systems, differentiated treatment of tokenization models, updated reporting standards for decentralized platforms, and explicit permission to use distributed ledger technology for recordkeeping. At the same time, US regulators have reaffirmed that tokenized securities remain subject to the same capital requirements as their underlying assets. Together, these elements show that discussions are moving toward integrating tokenized instruments into existing securities law rather than creating a separate regulatory regime.