Fidelity Urges SEC to Develop Regulatory Framework for Broker-Dealer Crypto Activities

Fidelity Investments has submitted a letter to the US Securities and Exchange Commission (SEC) in response to its call for comments on the regulation of broker-dealers' crypto activities. The company emphasized the need for clear rules and guidance for tokenized securities trading, including the differences between centralized and decentralized systems.

Fidelity noted that tokenization models vary significantly in structure and the rights afforded to holders, and that tokenized instruments have different issuance structures, legalities, and valuation models compared to traditional assets. The company also highlighted the need for the SEC to bridge the regulatory gap between centralized and decentralized trading systems, which would enable intermediated and disintermediated trading venues to coexist.

Fidelity recommended that the SEC overhaul existing reporting rules to reflect the technological reality of decentralized finance (DeFi) trading platforms and issue guidance permitting the use of distributed ledger technology for alternative trading system recordkeeping purposes. This would remove 'undue burden' from decentralized systems, according to Fidelity's letter.