In remarks at the Joint Compliance Outreach Program for municipal market professionals, U.S. Securities & Exchange Commission Commissioner Hester M. Peirce described tokenization as a potentially transformative development for the municipal securities market and invited market participants to engage early with the SEC when new technologies run into rules written for “an era of ink and paper.” She also argued that the SEC should work with industry to modernize recordkeeping requirements, using recent “off-channel communications” enforcement as an example of the costs of regulatory frameworks not keeping pace with how firms and individuals communicate. Peirce cited potential tokenization benefits including atomic settlement, extended-hours trading and easier pledging of assets as collateral, while noting municipal-specific attractions such as smaller minimum purchase amounts and potential improvements to secondary market liquidity. She pointed to Quincy, Massachusetts’ 2024 transaction as the first tokenized offering of municipal securities in the United States, but cautioned that wide-scale adoption is not inevitable given the market’s retail orientation, the large number of issuers, and the complex interplay of state law, securities law and tax law. On recordkeeping, she referenced prior enforcement actions against broker-dealers, municipal advisors, investment advisers and nationally registered securities rating organizations that generated billions of dollars in penalties over failures to capture electronic communications such as texts and WhatsApp chats, and called for a more pragmatic, updated approach across affected entities.

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