SEC Commissioner Hester Peirce affirms that tokenizing assets must still fully comply with federal securities regulations, despite the development of blockchain.
The tokenized asset market is facing a clear message from the top US regulatory agency: blockchain technology cannot change the legal nature of securities. In a statement on July 9, SEC Commissioner Hester Peirce outlined strict legal boundaries for the expanding tokenization wave on Wall Street.
"Tokenizing securities is still securities," Ms. Peirce emphasized in a statement that attracted financial industry attention. "Therefore, market participants need to consider and comply with federal securities laws when transacting with these instruments."
This perspective emerges as financial institutions accelerate experiments with diverse tokenization models. Some companies choose to tokenize their own stocks, while other custodial organizations tokenize benefit rights or issue instruments secured by custodial assets. However, each structure involves different legal and operational risks, including counterparty risks and regulatory ambiguity.
Token Structure Analysis is Key
The SEC Commissioner particularly noted the complexity in classifying different token types. Some token structures might be classified as securities-based swap contracts or synthetic instruments, which could be prohibited from trading on certain platforms, especially for small retail investors.
"Market participants involved in issuing, purchasing, and trading tokenized securities must also consider the nature of these securities and the legal consequences arising from securities law," Ms. Peirce warned.
She emphasized that blockchain, despite being a powerful technology, cannot "magically transform the legal nature of the underlying asset." This message aims to clarify that applying advanced technology cannot change financial institutions' legal compliance obligations.
While issuing serious warnings, Commissioner Peirce still demonstrated openness to adjusting outdated legal frameworks. She encourages companies to proactively engage with the SEC if they believe current regulations no longer align with blockchain-applied market realities. According to her, the SEC is willing to evaluate exemption or adjustment proposals if the technology brings unique characteristics.
However, her core message remains clear: while technology may evolve rapidly, the legal foundation of the US securities market remains fundamentally mandatory.
