Fidelity Urges SEC to Expand Broker-Dealer Crypto Rules as Tokenized Securities Framework Takes Shape

Broker-dealer clarity, ATS standards, and token classification emerge as central demands in Fidelity filing

TL;DR

• Fidelity calls on the SEC to establish clear broker-dealer rules for crypto trading and tokenized securities
• Firm pushes for reliance on issuer classification instead of repeated legal analysis by each platform
• Filing outlines structural differences across token models and regulatory gaps for DeFi and reporting

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Fidelity has urged the U.S. Securities and Exchange Commission to advance its regulatory framework governing broker-dealers handling crypto assets, calling for clearer operational standards that would allow firms to trade and custody tokenized securities on alternative trading systems. The firm submitted its recommendations to the SEC’s Crypto Task Force in response to Commissioner Hester Peirce’s request for input issued in December, which sought feedback on how national securities exchanges and ATS platforms should approach tokenized assets within existing market structures.

Fidelity’s filing emphasized the need for a defined regulatory pathway enabling broker-dealers to support tokenized securities issued by third parties, arguing that existing ambiguity creates operational friction for firms attempting to integrate blockchain-based instruments into regulated environments. The company pointed to its affiliate National Financial Services, which operates the CrossStream ATS for U.S. equities, as a real-world example of infrastructure already navigating these constraints while engaging with tokenization developments.

Central to Fidelity’s proposal is a request for the SEC to implement standards allowing ATS operators to rely on an issuer’s determination of a token’s regulatory classification, rather than requiring each broker-dealer to independently conduct a full legal assessment for every listed instrument. The firm described this duplication as impractical for scaling tokenized markets, particularly as product complexity increases across asset classes and issuance structures.

The filing references the SEC’s January 2026 taxonomy for tokenized securities, which outlines multiple categories including direct issuances, indirect entitlements, structured products linked to securities such as xStocks, and instruments potentially classified as securities-based swaps, including Robinhood’s tokenized stocks. The latter category is restricted to eligible contract participants and requires evaluation based on economic substance rather than labeling, according to the framework.

Fidelity stated that tokenized assets vary significantly in structure and investor rights depending on how they are issued and maintained, noting that “Tokenization models vary significantly in structure and in the rights afforded to holders.” The firm added that “In some models, the crypto asset represents a holder’s indirect interest in the underlying security through a securities entitlement, while in others, the crypto asset may constitute a securities-based swap, which may be offered only to eligible contract participants.”

The firm also called for regulatory adjustments to address differences between centralized and decentralized trading venues, urging the SEC to evaluate how “intermediated and disintermediated trading venues can evolve and coexist.” Fidelity noted that current reporting and disclosure requirements are designed for centralized entities and impose limitations on decentralized systems that lack a single controlling operator capable of generating traditional financial reports.

Fidelity further recommended that broker-dealers be explicitly permitted to use distributed ledger technology in ATS operations and recordkeeping processes, extending its proposals beyond asset classification into infrastructure modernization. The firm’s position aligns with broader regulatory discussions under SEC Chairman Paul Atkins, who has expressed support for continuous market operation models such as 24/7 trading, while U.S. banking regulators including the Federal Reserve, FDIC, and OCC stated in a joint March communication that “The technologies used to issue and transact in a security do not generally impact its capital treatment.”

This article has been refined and enhanced by ChatGPT.