Crypto: Sec Gives Guidance On Issuer Vs Third-party Tokenized Securities

The US regulator defines tokenized securities as issuer- or third-party-sponsored, stressing that blockchain issuance does not bypass federal securities laws.

The United States Securities and Exchange Commission has released new guidance on tokenized securities, categorizing assets into two categories to provide more clarity for companies entering the space.

The SEC’s statement on tokenized securities, released on Wednesday, defines the assets as issuer- or third-party-sponsored tokenized securities.

“Tokenized securities generally fall into two categories: (1) securities tokenized by or on behalf of the issuers of such securities; and (2) securities tokenized by third parties unaffiliated with the issuers of such securities,” the regulator stated.

Issuer-sponsored tokenized securities enable companies to tokenize their own securities in two ways: by integrating blockchain directly into their ownership records or issuing crypto assets that trigger off-chain ownership record updates on a separate ledger.

The legal treatment and registration requirements, and other securities laws, still apply regardless of whether a security is tokenized or traditional, it said.

Unaffiliated third parties can also tokenize securities through custodial or synthetic models, the SEC stated.

The custodial model involves creating tokenized security entitlements where the crypto asset represents an indirect ownership interest in underlying securities held in custody.

The synthetic model involves issuing new securities that provide exposure to underlying securities without actual ownership. Rights to the asset, or “linked security,” could be in the form of structured notes, exchangeable stock, or security-based swaps.

In essence, the SEC is clarifying that blockchain is merely a record-keeping technology; companies can use it, but securities laws still apply.

Source: CoinTelegraph