SEC Clarifies Tokenized Securities Fall Under Existing Regulations

The U.S. Securities and Exchange Commission has issued a stark warning to crypto markets: tokenization does not exempt traditional financial instruments from securities laws. In a joint statement, three SEC divisions emphasized that stocks or bonds represented on blockchain networks remain subject to federal oversight regardless of their technological format.

Regulators delineated two categories of tokenized securities - issuer-sponsored models that mirror conventional securities, and third-party structures that may strip investors of underlying rights. The guidance comes as Wall Street firms increasingly experiment with blockchain-based versions of equities and fixed-income products.

"Tokenization changes the wrapper, not the contents" appears to be the SEC's operative principle. By drawing clear parallels between digital and traditional securities, the Commission aims to prevent regulatory arbitrage while allowing responsible innovation to proceed.