U.S. Securities and Exchange Commission Commissioner Crenshaw urges caution on regulatory efforts to facilitate securities tokenization

In remarks at the U.S. Securities and Exchange Commission’s Crypto Task Force roundtable on tokenization, Commissioner Caroline A. Crenshaw questioned whether regulators should “rebuild” securities-market infrastructure to accommodate blockchain-based issuance and trading, citing definitional uncertainty and the systemic stakes of redesigning core market plumbing. Crenshaw highlighted that “tokenization” can mean either issuing securities directly on a blockchain or creating a digital representation of an off-chain security, with potentially different regulatory consequences, and raised questions about whether tokenization would extend across the full lifecycle including distribution, trading, clearing, and settlement. She argued that public permissionless blockchains face scalability constraints and are an awkward fit for heavily regulated securities markets, while private or permissioned blockchains may not be meaningfully different from existing database technologies, calling into question the case for regulatory adjustments and warning against government “picking winners and losers.” A central concern was proposals to move from T+1 to instant settlement (T+0): she emphasized that the settlement cycle supports multilateral netting that eliminates about 98% of trade obligations on average, reduces liquidity demands, accommodates retail payment practices, and provides time for compliance checks that can detect fraud and cybercrime and allow transactions to be paused when red flags arise. She also urged that any contemplated changes be appropriately scoped to the segment of the market participating in crypto, referenced as less than 5% of U.S. households, to avoid detriment to traditional markets used by most Americans.