Fidelity Investments is encouraging the U.S. Securities and Exchange Commission to fast-track regulatory development for integrating crypto assets in alternative trading systems and other existing market structures.
"We support the SEC Crypto Task Force and its forward-thinking approach to understanding and integrating new asset classes and technologies into the existing regulatory framework in ways that can improve market efficiency, transparency and investor access," the company wrote in a recent letter to the task force. "We commend the task force's proactive efforts with stakeholders and its commitment to fostering responsible innovation while safeguarding market integrity and investor protection."
The letter, which was submitted in response to an agency request for information about how national securities exchanges and ATS platforms should handle crypto asset trading, made several recommendations:
Continue to develop the regulatory framework for broker-dealers to offer custody and trade crypto assets. Given that ATSs are operated by broker-dealers, continued staff guidance is critical to enable them to offer custody and trade crypto assets.
Issue guidance to support the trading of tokenized securities on ATSs. The SEC should provide bright-line standards that permit ATSs to facilitate secondary market trading in tokenized securities created by third parties. This clarity is critical, because the regulatory status of a tokenized instrument depends on its economic realities, key facts that may not be fully knowable to a broker‑dealer. To facilitate secondary market trading in tokenized securities, ATSs must be able to rely on the status ascribed to the asset so they can support trading without the risk of impermissibly offering a securities‑based swap to a non‑eligible contract participant.
Consider how intermediated and disintermediated trading venues can evolve and coexist. As SEC-regulated intermediaries begin to support security crypto assets alongside traditional securities, it is important to recognize the potential challenges associated with supporting assets that may trade across both intermediated and disintermediated venues. Disintermediated trading venues may offer increased transparency, liquidity, lower transaction costs, faster settlement and operational efficiencies for trading crypto securities. However, they also may pose challenges to the extent that they are not subject to the same controls applicable to regulated intermediaries.
Revisit existing requirements and provide clarity to facilitate the integration of on- chain systems into securities markets. The SEC should issue guidance permitting broker‑dealers to use distributed ledger technology for ATSs and other recordkeeping purposes, similar to the guidance the staff has issued allowing transfer agents to use this technology to maintain records.
Fidelity also acknowledged the agency's overall work in this area.
"We support the Securities and Exchange Commission Crypto Task Force and its forward-thinking approach to understanding and integrating new asset classes and technologies into the existing regulatory framework in ways that can improve market efficiency, transparency and investor access," the letter said. "We commend the task force's proactive efforts with stakeholders and its commitment to fostering responsible innovation while safeguarding market integrity and investor protection."
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