SEC Clarifies Rules for Tokenized Securities as Blockchain Adoption Grows

U.S. regulators have taken a clearer position on how securities laws apply to blockchain-based financial products. New guidance from the Securities and Exchange Commission (SEC) addresses growing interest in tokenized securities and how they fit within existing legal frameworks. Market participants have pushed for clarity as tokenization expands beyond experimental use into real-world applications. The latest statement aims to reduce uncertainty without altering core regulatory expectations.

SEC Confirms Tokenized Securities Remain Subject to Federal Law

On Wednesday, the SEC released a joint statement through its Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets. The guidance explains how federal securities laws apply when traditional securities are issued or represented using crypto networks. 

Officials defined a tokenized security as a financial instrument that is already covered by federal securities law and is formatted as, or represented by, a crypto asset. In these cases, ownership records are maintained, in whole or in part, on blockchain-based systems.

According to the SEC, companies may integrate distributed ledger technology into official ownership records without changing the legal status of the security. Interestingly, obligations related to disclosure, reporting, and investor protection remain unchanged. The recordkeeping format or method does not affect how securities laws apply, even when blockchain infrastructure is used.

Key regulatory points outlined in the statement include:

• Tokenized securities remain securities under federal law, regardless of digital format.
• Registration requirements apply to every offer and sale unless a valid exemption exists.
• Blockchain-based ownership records do not replace legal compliance obligations.
• Technology choices do not alter investor rights or issuer responsibilities.

The guidance noted that certain structures, including custodial or synthetic arrangements, may not provide holders with direct ownership rights in the underlying security. As a result, risks associated with intermediaries—such as insolvency—can affect holders of tokenized instruments differently from traditional shareholders. 

For example, security-based swaps were cited because they typically do not confer equity, voting, or information rights related to the referenced asset. Regulators also stressed that legal treatment is determined by economic reality rather than product labels.

Regulators Hint at Regulated On-Chain Trading for Tokenized Equities

Digital securities firm Securitize stated on social media that the guidance supports issuer-backed tokenization and on-chain recordkeeping as a modern extension of market infrastructure. Company representatives said clearer rules are necessary for responsible growth in tokenized markets.

Meanwhile, Coinbase’s Chief Legal Officer, Paul Grewal, described the statement as a strong signal that tokenized equities could move toward regulated on-chain trading in the United States.

The SEC divisions concluded the statement by signaling a willingness to work with issuers, platforms, and intermediaries as tokenized securities activity increases. Officials indicated continued engagement with market participants seeking to meet compliance standards while using blockchain-based systems.