SEC Reaffirms Securities Laws Apply to Tokenisation

The U.S. Securities and Exchange Commission delivered an important message that blockchain technology does not alter long-standing legal obligations by formally clarifying how federal securities laws apply to tokenised securities. Securities do not lose their legal character simply because they are represented on a distributed ledger, the Commission stressed in a joint statement released by multiple SEC divisions.

The same rules governing registration, disclosure, custody, and investor protection apply whether data is stored in a conventional database or tokenised on a blockchain. The guidance comes at a time when tokenisation is increasingly being explored by financial institutions, fintech companies, and digital asset platforms as a way to modernise capital markets infrastructure.

• SEC Confirms Technology Neutrality in Securities Regulation
• Issuer-Sponsored Tokenised Securities
• Third-Party Tokenised Securities and Structural Risks
• Custody, Recordkeeping, and Transfer Obligations Remain Unchanged
• Why the SEC’s Guidance Matters for the Tokenisation Market?

SEC Confirms Technology Neutrality in Securities Regulation

According to the Commission, an instrument’s status as a security under US law is unaffected by the method used to record ownership or transfer interests, including distributed ledger technology (DLT). As stated in the official release published on the SEC’s website, offers and sales of securities must continue to comply with the Securities Act of 1933 and the Securities Exchange Act of 1934.

This means that issuers must either register securities with the SEC or rely on a valid exemption, regardless of whether the securities are issued in traditional form or tokenised. The SEC explicitly rejected the notion that tokenisation creates a new asset class that is exempt from regulation.

Instead, the Commission reiterated that legal analysis must focus on the economic reality and the rights conveyed, rather than the technology used to represent them.

Issuer-Sponsored Tokenised Securities

One key area of clarification relates to issuer-sponsored tokenised securities. These are securities where the original issuer, or an authorised agent, chooses to tokenise the instrument and record ownership interests on a blockchain.

According to the SEC, tokenisation may serve as a modern recordkeeping method in these cases, but it does not alter the issuer’s legal obligations. Anti-fraud provisions, reporting requirements, and disclosure obligations remain fully applicable.

Unless an exemption applies, tokenised shares, notes, or other instruments issued directly by the issuer continue to be subject to registration requirements. Importantly, the SEC noted that even if blockchain technology improves efficiency, transparency, or settlement speed, it does not replace statutory obligations.

Issuers cannot rely on technological innovation alone to justify deviations from investor protection frameworks established under federal law. This clarification is particularly relevant for companies exploring on-chain capitalisation tables, blockchain-based shareholder records, or tokenised equity offerings.

Third-Party Tokenised Securities and Structural Risks

The SEC’s statement draws a clear distinction between issuer-sponsored tokenisation and third-party tokenised securities, which are created by entities other than the original issuer. These structures raise additional regulatory and investor protection concerns.

The Commission identified two common third-party models:

• Custodial Tokenised Securities: In custodial tokenised securities, a third party issues tokens representing a claim or entitlement to an underlying traditional security while retaining custody of that security. In such cases, investors rely heavily on the custodian’s operational controls, financial stability, and compliance with custody regulations.
• Synthetic Tokenised Securities: Synthetic tokenised securities do not represent direct ownership of the underlying asset. Instead, they provide financial exposure through contractual or derivative-like arrangements. The SEC noted that these structures may introduce additional risks, including counterparty exposure and complex rights enforcement.

In both models, the SEC made it clear that token holders’ rights depend on the legal structure, not the technology. The presence of a blockchain token does not automatically confer shareholder or creditor rights unless those rights are legally established.

Custody, Recordkeeping, and Transfer Obligations Remain Unchanged

The SEC’s guidance on custody and recordkeeping is a critical component of the statement. The Commission reaffirmed that even when dealing with tokenised securities, regulated intermediaries such as broker-dealers and investment advisers must comply with existing custody rules.

The guidance makes clear that the use of blockchain technology does not remove obligations related to safeguarding client assets, maintaining accurate records, or complying with transfer agent requirements. Market participants must carefully assess whether their tokenisation models align with the legal frameworks governing settlement and custody.

The SEC’s position underscores that while blockchain may support innovation, it does not override legal obligations designed to protect investors and preserve market integrity.

Why the SEC’s Guidance Matters for the Tokenisation Market?

This guidance represents one of the clearest statements to date from the U.S. Securities and Exchange Commission on how tokenised securities fit within existing legal frameworks. It reassures investors that traditional safeguards remain in place, even within blockchain-based markets.

At the same time, the message to developers and fintech companies is clear: innovation must occur within established regulatory boundaries. While the SEC remains open to technological advancement, compliance expectations will continue to be grounded in long-standing securities law principles rather than novel interpretations of blockchain technology.

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