SEC issues guidance on tokenized securities, outlines difference between issuer-sponsored and third-party models

The US Securities and Exchange Commission (SEC) issued detailed guidance on tokenized securities on Wednesday, clarifying that federal securities laws apply equally to blockchain-based assets regardless of the technology used to issue them.

In a joint statement from the Division of Corporation Finance, the Division of Investment Management and the Division of Trading and Markets, the SEC outlined two primary classifications for tokenized securities: issuer-sponsored and third-party models. The guidance arrives amid a tokenization boom across crypto markets, with major financial institutions increasingly exploring blockchain-based securities issuance.

"The format in which a security is issued or the methods by which holders are recorded (e.g., onchain against offchain) does not affect application of the federal securities laws," the statement emphasized, making clear that technological innovation does not exempt issuers from existing regulatory frameworks.

The SEC highlighted the distinction between securities tokenized directly by issuers and those tokenized by unaffiliated third parties. Under the issuer-sponsored model, companies integrate Distributed Ledger Technology (DLT) into their master securityholder files, maintaining ownership records on blockchain networks rather than conventional databases.

"The only difference between a security issued in this manner and securities issued in traditional format is that instead of maintaining the master securityholder file through conventional, offchain database records, the issuer (or its agent) maintains the master securityholder file on one or more crypto networks," according to the guidance.

Third-party models come with complexity

The SEC identified two subcategories of these third-party models: custodial tokenized securities, where crypto assets represent security entitlements held in custody, and synthetic tokenized securities, which provide exposure to underlying securities through linked instruments or security-based swaps. These third-party arrangements may expose token holders to additional risks, including bankruptcy exposure to the third party itself.

The guidance stressed that tokenized securities must comply with Securities Act registration requirements unless an exemption applies. The SEC noted that "Stock" is considered an equity security under federal law, regardless of whether it exists as a traditional certificate or a blockchain token.

The move comes as Wall Street giants recently met with the SEC's Crypto Task Force to discuss regulatory concerns, signaling increased institutional interest in tokenized markets despite ongoing questions about how existing frameworks accommodate blockchain infrastructure.

Meanwhile, the New York Stock Exchange (NYSE) has announced plans to launch a separate trading venue for tokenized assets, while the Nasdaq is seeking regulatory approval to integrate tokenized assets directly on its platform.