The United States Securities and Exchange Commission (SEC) has finally unlocked the question around which database to consider as the legal record for tokenized stocks. For those unaware, tokenized stocks currently have two different ownership records.
One record exists on the blockchain, showing which wallet holds the token. Meanwhile, another record is maintained by a legally recognized transfer agent.
However, now with the new SEC blockchain proposal, it’s a win-win for blockchain technology.
Will the SEC blockchain proposal bridge the long standing gap?
Rather than maintaining separate on-chain and off-chain ownership records, the blockchain could become the “master securityholder file”. This would in turn reduce the need for reconciliation and minimize legal and operational risks.
Needless to say, the change would turn out to be apt for events like bankruptcy, when conflicting ownership records can create major disputes.
However, blockchain-based securities would still remain subject to securities laws. Yet this does not mean all off-chain records disappear.
Transfer agents would still need records such as the control book, which tracks how many securities are authorized and outstanding. At the same time, the transfer journal would help keep track of record issuance, cancellation, and transfer activity. In short the goal is to not to remove every database but to eliminate the need for a duplicate ownership register.
SEC’s blockchain revamp
1:1 backed is not the same as 1:1 ownership.
His point is that the industry needs to be much clearer about whether tokenized assets give investors actual legal ownership of the underlying securities or simply exposure to assets held by an intermediary.
This distinction becomes especially important under the SEC’s blockchain proposal because it focuses on making the ownership record itself authoritative.
What’s more?
Under the new Travel Rule for Digital Assets, exchanges will have to record and retain sender and beneficiary information for at least five years to strengthen anti-money-laundering controls.
Final Summary
- The SEC blockchain proposal would allow blockchain ledgers to serve as the official record of securities ownership.
- At the same time, the SEC is revisiting crypto custody rules as it prepares proposed amendments to the Custody Rule.
