SEC Sets Clear Line Between Issuer and Third-Party Tokenized Securities

Jimmy Aki
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On January 28, the U.S. Securities and Exchange Commission (SEC) issued new guidance, firmly distinguishing between two models for tokenized securities. The agency made clear that using blockchain technology does not alter a product’s legal status.

The agency said tokenized securities are still securities under federal law.

According to the SEC, these products already meet the legal definition of a security and do not change simply because they are issued or tracked using crypto networks. Whether records are kept on a blockchain or elsewhere does not affect the law’s application.

Technology Does Not Change Legal Status

The SEC outlined clear differences between issuer-sponsored and third-party models.

The issuer-sponsored model applies when a company tokenizes its own financial instruments. According to the agency, issuers can do this in two ways.

In one, blockchain technology is built directly into the company’s official ownership records. In the other, the issuer or its service provider keeps ownership records off-chain, while crypto assets are used to trigger updates to those records.

In both cases, the SEC said issuers remain fully responsible for compliance. Registration rules, disclosure obligations, and investor protections still apply.

The agency then addressed tokenized securities created by third parties that are not connected to the issuer. It identified two main structures: custodial and synthetic.

Under the custodial model, a regulated custodian holds the underlying securities. Investors hold tokens that represent indirect interests in those securities, but they do not hold the securities themselves.

The SEC said this structure remains subject to existing securities laws.

The synthetic model does not provide ownership at all. Instead, it gives investors economic exposure to another security.
These products may be issued as structured notes, exchangeable securities, or security-based swaps linked to an underlying asset.

The SEC cautioned that these arrangements can raise additional regulatory issues.

Security-based swaps received specific mention. The SEC noted that when these products are offered to investors who are not eligible contract participants, firms may face extra registration and exchange-trading requirements.

The agency emphasized one point throughout the guidance. Tokenization does not reduce legal obligations. Federal securities laws apply regardless of how ownership records are maintained.

Regulation Tightens as Firms Test Tokenization

The guidance comes as companies continue to test how tokenized securities fit within current rules.

Last week, F/m Investments filed a request seeking approval to record ownership of tokenized shares of its Treasury bill ETF on a permissioned blockchain. The filing reflects how firms are adapting existing products rather than creating new ones.

The SEC said the guidance is not an approval of tokenized products. It told firms to treat it as a guide and to work directly with regulators when filing applications or requests.

In Washington, lawmakers are pushing ahead with broader crypto rules.

Members of the Senate Banking and Agriculture Committees have moved faster on the Digital Asset Market Clarity Act, which would change how digital assets and stablecoins are regulated.

Outside the United States, regulators are taking similar steps. The UK’s Financial Conduct Authority has launched its final consultation on applying Consumer Duty rules to crypto asset firms.

Russia has completed a draft bill to integrate crypto into standard financial law by mid-2026, while reports suggest South Korea may ease restrictions on corporate crypto investment, reflecting a shift toward a tighter regulatory structure.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.