SEC Issues Guidance on Tokenized Securities

The U.S. Securities and Exchange Commission issued new guidance on Wednesday clarifying how federal securities laws apply to tokenized securities, categorizing them into issuer-sponsored and third-party models to address the integration of blockchain technology in traditional financial instruments.

The statement, released jointly by the SEC's Divisions of Corporation Finance, Investment Management, and Trading and Markets, emphasizes that the format of a security, whether recorded on a blockchain or in traditional databases, does not alter its legal status or regulatory obligations. Tokenized securities must comply with existing rules on registration, disclosure, and investor protections, regardless of whether ownership is tracked on-chain or off-chain. This guidance comes amid increasing adoption of distributed ledger technology in capital markets, aiming to provide market participants with a framework for compliant innovation.

Issuer-sponsored tokenized securities involve companies directly tokenizing their own assets or authorizing third parties to do so on their behalf. In one approach, issuers integrate blockchain networks into their official ownership records, allowing...