The new guidance focuses on the structure of tokenized securities.
Staff at the U.S. Securities and Exchange Commission (SEC) on Wednesday, Jan. 28, issued new guidance explaining how existing securities laws apply to tokenized securities.
The statement – issued jointly by the Division of Corporation Finance, the Division of Investment Management, and the Division of Trading and Markets – points out that securities issued or represented on blockchains remain subject to the same rules as traditional securities.
Notably, the statement functions as guidance and does not create new rules or change existing law. Instead, it aims to clarify how current securities laws apply as more institutions begin experimenting with tokenized products.
The statement emphasizes that “it is not a rule, regulation, guidance, or statement” of the SEC, and the “Commission has neither approved nor disapproved its content.”
According to the statement, tokenized securities generally fall into two categories: issuer-sponsored and third-party sponsored.
In issuer-sponsored models, a company issues its own securities in tokenized form. The main difference from traditional securities is that ownership records are kept onchain. When the token is transferred, ownership of the underlying security transfers as well.
In third-party models, an unaffiliated firm tokenizes securities it did not issue. The asset “may or may not represent an ownership interest in or contractual obligation of the issuer of the underlying security,” the statement explains. As a result, owning the token does not always mean you have the same rights as owning the actual security.
The statement also notes that holders of these crypto assets may face additional third-party risks, such as bankruptcy, that would not necessarily apply to holders of the underlying security.
Ashley Ebersole, chief legal officer at Sologenic, told The Defiant that later guidance could look into self-custody and decentralized finance (DeFi) if the SEC wishes.
“However, I’d expect that if additional guidance like this were forthcoming, it would still fit allowance for self-custody or otherwise into the existing securities law mandates (at least until congressional legislation changes what the securities laws require in this context),” he added.
Ebersole added that the guidance does not preclude tokenized or synthetic securities from being offered to U.S. investors.
“The guidance makes clear that tokenized securities and tokenized security-based swaps are subject to the securities laws’ existing registration and disclosure obligations,” he added. “So any product could legally be offered to the U.S. market, so long as it fulfills those obligations.”
