Leading asset management firm Fidelity Investments recently submitted a formal petition to the US Securities and Exchange Commission (SEC), urging the agency to expedite the process of finalizing regulations to integrate cryptocurrencies into the existing financial market system. The focus was on establishing a clear legal framework for alternative trading systems (ATS) and the operations of broker-dealers involved in the crypto sector.
In a letter to the SEC's crypto task force, Fidelity expressed support for the direction of adjusting traditional regulatory frameworks to accommodate new technologies, particularly blockchain. However, the company also emphasized that any changes must uphold core principles such as investor protection, transparency, and market integrity – fundamental elements that have kept the US financial market stable for decades.
This move comes after Commissioner Hester Peirce called for stakeholder input late last year to shape how national stock exchanges and ATS platforms handle digital asset trading. It is XEM as a signal that the SEC is gradually shifting from an enforcement-oriented approach to a more open dialogue and policy-making process for the crypto industry.
Fidelity has put forward a series of specific proposals, most notably the continued development of regulations for broker-dealers providing custody, trading, and support for trading pairs between crypto and digital securities. The company appreciates recent SEC guidance allowing broker-dealers to custody both digital assets considered securities and non-securities, but argues that there is still a lack of clarity in practical operating procedures, particularly regarding trading and asset management.
Another key focus is establishing clear standards for Tokenize securities on ATS platforms. According to Fidelity, the SEC needs to provide transparent criteria to allow secondary trading of Tokenize assets issued by third parties. This is particularly important because classifying a Token as a security or a complex financial instrument depends on its economic nature – a factor that broker-dealers cannot always fully determine.
Fidelity also proposed that Tokenize versions of traditional securities should be recognized as having the same legal status as the underlying asset. If implemented, this principle could help reduce the Shard between on-chain and traditional financial markets, while opening up opportunities for liquidation connectivity between the two ecosystems.
Furthermore, the company emphasized the importance of allowing centralized and decentralized markets to coexist. Blockchain-based platforms can offer significant benefits such as shorter settlement times, reduced costs, and increased transparency, but they lack the Capital protection mechanisms inherent in traditional financial intermediaries. Therefore, the SEC needs to develop balanced regulations to leverage the advantages of both models.
