The U.S. Securities and Exchange Commission (SEC) released guidance Wednesday outlining how federal securities laws apply to tokenized financial instruments, establishing a regulatory framework as traditional finance increasingly adopts blockchain technology.
The joint statement from the SEC's divisions of Corporation Finance, Investment Management, and Trading and Markets distinguishes between securities tokenized directly by issuers and those tokenized by third parties, providing clarity on compliance requirements for each model.
The guidance provides the SEC's first comprehensive framework for tokenized securities as the technology matures beyond early experimentation.
The statement addresses growing confusion in the market about whether blockchain-based securities require different regulatory treatment than traditional instruments. By affirming that existing securities laws apply regardless of format, the SEC aims to enable innovation while maintaining investor protections established under decades of securities regulation.
Market participants can now submit registrations and proposals for tokenized securities with clearer understanding of compliance requirements, potentially accelerating adoption of blockchain settlement infrastructure across capital markets.
"This statement is intended to assist market participants as they seek to comply with the federal securities laws and prepare to submit any necessary registrations, proposals, or requests for appropriate action," the divisions said.
The guidance comes as major financial institutions race to build tokenized securities infrastructure. The New York Stock Exchange announced earlier this month it is developing a platform for 24/7 trading of tokenized stocks with instant settlement, pending regulatory approval. Ondo Finance has tokenized over 200 securities on its platform, which has processed more than $6.4 billion in cumulative trading volume.
Under the SEC framework, tokenized securities fall into two categories: issuer-sponsored and third-party-sponsored. For issuer-sponsored tokenization, companies can issue securities directly as crypto assets by integrating distributed ledger technology into their master securityholder files, making blockchain records the official ownership registry.
Alternatively, issuers can maintain traditional offchain records while using crypto assets to facilitate transfers. In this model, blockchain transactions trigger updates to the official ownership records maintained through conventional databases.
The statement emphasizes that format does not change regulatory treatment. "The format in which a security is issued or the methods by which holders are recorded (e.g., onchain vs. offchain) does not affect application of the federal securities laws," the divisions said. Securities Act registration requirements apply regardless of whether a stock trades as a traditional certificate or tokenized asset.
For third-party tokenization, the SEC outlined two models: custodial and synthetic. Custodial tokenized securities represent ownership interests in underlying securities held in custody, similar to how exchange-traded funds hold baskets of stocks. The crypto asset evidences the holder's direct or indirect ownership of the custodied security.
Synthetic tokenized securities provide exposure to underlying securities without conveying actual ownership. These include linked securities like structured notes or security-based swaps formatted as crypto assets. The statement notes holders of synthetic tokenized securities may face risks from the third-party issuer, such as bankruptcy exposure, that holders of the underlying security would not encounter.
Security-based swaps face additional restrictions. Third parties cannot offer tokenized swaps to retail investors unless a Securities Act registration statement is in effect and transactions occur on a national securities exchange. These instruments can only be sold to eligible contract participants in unregistered offerings.
