Fidelity has submitted a comment letter to the Securities and Exchange Commission calling for clearer rules governing how broker-dealers can custody, trade, and facilitate transactions in crypto assets. The letter targets a persistent structural problem: the broker-dealer framework under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) was designed for centralized clearinghouses and paper-based settlement, not blockchain-native assets held through cryptographic private keys.

Despite meaningful progress — the SEC’s rescission of Staff Accounting Bulletin No. 121, the establishment of the Crypto Task Force under Chairman Paul Atkins, and the OCC’s interpretive letters on bank crypto custody — broker-dealers still lack the operational rules needed to offer integrated crypto and traditional brokerage services. Fidelity’s letter puts a concrete demand on the table: the SEC should act through formal guidance or rulemaking, not force firms to seek individual no-action relief.

Key Takeaways

• Custody rules don’t fit crypto: The Customer Protection Rule (Rule 15c3-3, 17 C.F.R. § 240.15c3-3) requires broker-dealers to maintain “possession or control” of customer securities — a standard that maps poorly onto private key management, multi-signature wallets, and blockchain-based settlement.
• The special purpose broker-dealer framework is too narrow: The SEC’s 2021 conditional framework for special purpose broker-dealers (SPBDs) limits firms to digital asset securities only, preventing integrated platforms like Fidelity from offering unified traditional and crypto brokerage services.
• Crypto-security trading pairs create dual-jurisdiction exposure: Facilitating trades between tokenized securities and non-security crypto assets (e.g., tokenized equities paired with stablecoins) may trigger both SEC and CFTC registration requirements, with no clear guidance on how to comply with both.
• Net capital haircuts may be punitive: Current haircut schedules under Rule 15c3-1 (17 C.F.R. § 240.15c3-1) were calibrated for traditional securities, not crypto assets with different volatility profiles. This could make holding crypto economically unviable for broker-dealers.
• SIPC coverage for crypto remains uncertain: Customer assets held by a broker-dealer are generally protected under the Securities Investor Protection Act (15 U.S.C. § 78ccc et seq.), but whether and how SIPC protection extends to crypto assets held in custody has not been definitively resolved.

Why Can’t Broker-Dealers Simply Add Crypto Services?

Any entity that effects transactions in securities for the accounts of others must register as a broker-dealer under Section 15(a) of the Exchange Act (15 U.S.C. § 78o(a)). Registration triggers a comprehensive regulatory framework: the Net Capital Rule (Rule 15c3-1), the Customer Protection Rule (Rule 15c3-3), FINRA membership and supervision requirements, books-and-records obligations under Rules 17a-3 and 17a-4 (17 C.F.R. §§ 240.17a-3, 240.17a-4), and anti-money laundering programs under the Bank Secrecy Act (31 U.S.C. § 5311 et seq.).

These rules assume a specific infrastructure: securities held through the Depository Trust & Clearing Corporation (DTCC), standardized settlement cycles (currently T+1), and qualified custodians operating within established regulatory perimeters. Crypto assets break each of these assumptions. Settlement is peer-to-peer on public blockchains. Custody means controlling a private key — not an account at a depository. And the classification of any given crypto asset as a security, commodity, or neither may depend on facts that change over time, following the framework established in SEC v. W.J. Howey Co., 328 U.S. 293 (1946).

What Specific Changes Is Fidelity Seeking?

Modernized Custody Standards Under Rule 15c3-3

Rule 15c3-3 requires broker-dealers to maintain physical possession or control of fully paid customer securities. For digital assets, “possession or control” raises fundamental operational questions. Does holding a private key in a hardware security module (HSM) satisfy the rule? What about multi-signature arrangements where no single entity controls all keys? The SEC’s 2021 staff statement on digital asset custody provided initial guidance but stopped short of formal rulemaking.

Fidelity’s letter calls for the Commission to issue either a rule amendment or an interpretive release that specifically addresses how digital asset custody fits within the 15c3-3 framework — establishing clear standards rather than requiring each firm to negotiate individual relief.

Risk-Based Net Capital Treatment

Under Rule 15c3-1, broker-dealers must maintain minimum net capital with “haircuts” (deductions) applied to securities positions to account for market risk. The existing haircut percentages were designed for equities, fixed income, and options — not crypto assets. Applying the residual “catch-all” haircut to crypto positions could require deductions so large that holding crypto becomes economically prohibitive.

Fidelity advocates for a tiered capital framework: differentiated treatment based on whether a crypto asset is classified as a security, a commodity, or a payment token, with haircuts calibrated to each category’s observed volatility. This approach mirrors how the Basel Committee on Banking Supervision has proposed treating crypto-asset exposures for banks (the “Group 1” and “Group 2” classification framework).

Guidance on Crypto-Security Trading Pairs

As tokenized securities — including tokenized Treasury bills, equity tokens, and real-world asset (RWA) tokens — enter the market, broker-dealers are being asked to facilitate trades that pair securities with non-security crypto assets (e.g., a tokenized stock settled against USDC). These transactions implicate both the Exchange Act and the Commodity Exchange Act (7 U.S.C. § 1 et seq.). A broker-dealer facilitating such trades may need to consider whether it also requires registration as a futures commission merchant (FCM) or swap dealer with the CFTC, and how FINRA Rule 5310 best execution obligations apply when one leg of the trade involves a non-security asset.

How Does This Fit the Current Regulatory Landscape?

The SPBD Framework’s Limitations

In 2021, the SEC’s Division of Trading and Markets established a temporary, conditional framework allowing special purpose broker-dealers to custody digital asset securities. SPBDs must limit their activities exclusively to digital asset securities and maintain specific operational policies. This framework has been criticized on two fronts: it prevents firms from offering integrated services that span both traditional and digital assets, and it does not address non-security crypto assets — which represent the majority of market trading volume.

For a firm like Fidelity — which operates brokerage, custody, and asset management services across asset classes — the SPBD framework is structurally inadequate. The company’s letter argues, in substance, that the industry has moved beyond the pilot-program stage and needs permanent rules for full-service broker-dealers.

Post-SAB 121: Accounting Solved, Operations Unsettled

Staff Accounting Bulletin No. 121, issued in March 2022 under then-Chair Gary Gensler, required entities safeguarding crypto assets to record a corresponding liability on their balance sheets. For banks and broker-dealers subject to risk-based capital requirements, this made crypto custody prohibitively expensive. The SEC rescinded SAB 121 in early 2025, removing the accounting barrier.

But rescinding an accounting bulletin does not create an operational framework. Broker-dealers still need answers on possession-or-control standards, net capital treatment, books and records, and customer notification requirements. Fidelity’s letter addresses this gap directly: SAB 121’s removal was necessary but not sufficient.

The SEC Crypto Task Force

The Crypto Task Force established under Chairman Atkins in early 2025 has convened multiple roundtables with industry participants on topics including token classification, trading platforms, and custody. Fidelity’s comment letter is part of this broader engagement process. Whether the Task Force recommends formal rulemaking — as opposed to additional staff guidance or no-action letters — will determine the durability and scope of any resulting framework.

Pending Legislation

Congressional action could reshape the landscape. The CLARITY Act, if enacted, would establish clearer criteria for distinguishing securities from commodities in the crypto context, directly affecting broker-dealer obligations. The GENIUS Act’s stablecoin provisions could also affect how broker-dealers treat stablecoin settlement. However, legislative timelines remain uncertain, and Fidelity’s letter signals that the industry is pressing the SEC to act within its existing statutory authority rather than wait for Congress.

Practical Implications

For SEC-Registered Broker-Dealers

• Audit your custody infrastructure now. Map your existing digital asset custody arrangements (if any) against Rule 15c3-3 requirements. Identify whether your key management, wallet architecture, and third-party custody relationships would satisfy a “possession or control” standard under any plausible interpretation the SEC might adopt.
• Model the capital impact. Run net capital calculations assuming crypto positions are subject to various haircut scenarios — from the current catch-all rate to a potential tiered framework. Understanding the range will help you plan ahead of any rulemaking.
• Engage FINRA early. Broker-dealers seeking to add crypto services will need to amend their FINRA membership agreements and may require approval of new lines of business. FINRA’s review timeline can be lengthy; beginning discussions now is prudent.

For Crypto-Native Firms

• Evaluate broker-dealer registration. If your platform facilitates transactions that could be deemed securities trades under the Howey test, operating without registration carries significant enforcement risk — including disgorgement and injunctive relief. Clearer rules may lower the compliance cost of registration.
• Submit comments. If the SEC opens a formal rulemaking on broker-dealer crypto activities, participate. Comment letters shape final rules, and the SEC is legally required to address substantive comments in its adopting release.

For Institutional Investors

• Understand the SIPC gap. Until the SEC and SIPC clarify coverage for crypto assets held in brokerage accounts, assume that your crypto holdings may not receive the same liquidation protections as traditional securities. Consider this when choosing custody arrangements.
• Ask your broker-dealer about compliance readiness. Specifically ask whether they have assessed Rules 15c3-1 and 15c3-3 compliance for digital asset services, and whether they have sought or received any SEC guidance on the topic.

What to Do Now

1. Monitor the SEC Crypto Task Force agenda for upcoming roundtables and requests for comment on broker-dealer topics.
2. Review your compliance policies for crypto asset activities against Rules 15c3-1, 15c3-3, 17a-3, and 17a-4.
3. Consult legal counsel before launching or expanding crypto services through a broker-dealer — the regulatory landscape is shifting, but non-compliance carries enforcement risk.
4. Track the CLARITY Act and GENIUS Act — either could alter the broker-dealer calculus by clarifying asset classification and stablecoin treatment.

Conclusion

Fidelity’s comment letter reflects a straightforward industry demand: broker-dealers need workable rules for crypto, not workarounds. The Exchange Act framework — designed for centralized clearinghouses and paper settlement — cannot accommodate blockchain-based assets without deliberate adaptation by the SEC. The rescission of SAB 121 cleared an accounting obstacle, but the operational questions around custody, net capital, and dual-jurisdiction trading remain open.

The SEC’s response — whether through formal rulemaking, expanded guidance, or continued reliance on no-action relief — will determine how quickly traditional financial institutions can bring regulated crypto services to market. For practitioners, the immediate priority is preparation: audit custody infrastructure, model capital impact, and engage in the comment process while the rules are still being written.

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This article is for informational and educational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations in the cryptocurrency space change rapidly — consult a qualified attorney for advice specific to your situation and jurisdiction. Seth Goettelman is licensed to practice law in Wisconsin and Florida.