Fidelity Urges SEC to Expand Crypto & Tokenized Asset Rules

• Fidelity Investments has formally requested that the U.S. Securities and Exchange Commission (SEC) expand the regulatory framework for broker-dealers to custody and trade crypto assets.
• The asset manager advocates for the integration of tokenized securities on Alternative Trading Systems (ATS) and the modernization of reporting rules for decentralized platforms.
• Financial regulators, including the Federal Reserve, have recently indicated that the underlying technology used for securities does not change their capital requirement status.

Recommendations for Tokenized Securities

Fidelity Investments, currently the third-largest asset manager in the United States, submitted a letter to the SEC’s Crypto Task Force urging for more comprehensive rules regarding digital assets. The firm emphasized that establishing a clear "rule of the road" is essential for broker-dealers to effectively offer and trade tokenized securities issued by third parties.

Fidelity noted that tokenized instruments are diverse and complex, requiring specific regulatory attention. These instruments include:

• Real-world assets (RWAs) such as real estate and private credit.
• Traditional financial instruments like equities and bonds.
• Various debt instruments and Real Estate Investment Trusts (REITs).

Addressing the DeFi Reporting Gap

In the letter, Fidelity General Counsel Roberto Braceras highlighted the need to bridge the gap between centralized and decentralized trading environments. He suggested that the SEC must recognize the evolution of "disintermediated" systems where a central authority does not exist to produce traditional financial reports.

Fidelity proposed an overhaul of existing reporting requirements to ensure that Decentralized Finance (DeFi) platforms are not unfairly burdened by rules designed for centralized entities. Furthermore, the firm recommended that the regulator provide official guidance allowing broker-dealers to utilize distributed ledger technology (DLT) for recordkeeping and ATS operations.

Alignment with Federal Regulatory Standards

The push for expanded crypto activity comes as SEC Chairman Paul Atkins signals support for 24/7 capital markets and experimental tokenized trading. This regulatory shift aligns with a joint policy statement issued in March by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

These agencies clarified that the technology used to issue or transact a security does not generally alter its capital treatment. Consequently, tokenized securities remain subject to the same banking capital requirements as the traditional assets they represent, ensuring a level of stability across different technological implementations.