U.S. Securities and Exchange Commission (SEC) Commissioner Hester M. Peirce issued a statement on the tokenization of securities, emphasizing that blockchain-based “tokenized” formats do not change the legal nature of the underlying instrument. Tokenized securities are still securities, and firms distributing, purchasing, or trading them must comply with applicable federal securities laws. The statement distinguishes between issuers that tokenize their own securities and unaffiliated third parties that issue tokenized instruments tied to securities they hold in custody or that tokenize investors’ “security entitlements,” noting potential additional risks for purchasers of third-party tokens, including counterparty risk. It also flags disclosure considerations for distributors and points to the Division of Corporation Finance’s staff statement on offerings and registrations in crypto asset markets. Depending on the facts, tokenized instruments could be treated as distinct securities such as “receipts for a security,” or as “security-based swaps,” which the statement notes cannot be traded off exchange by retail persons; the same legal requirements apply to on- and off-chain versions of these instruments. Market participants are encouraged to meet with the SEC and its staff when structuring tokenization offerings, with the statement indicating a willingness to work on appropriate exemptions and rule modernization where technology-specific features justify changes or where requirements are outdated or unnecessary.

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