TechFlow news, July 10 — The U.S. SEC issued a statement on tokenized securities, which reads as follows: Blockchain technology opens new models for issuing and trading securities in a "tokenized" form. Tokenization has the potential to facilitate capital formation and enhance investors' ability to use their assets as collateral. However, despite the significant promise of blockchain technology, it possesses no "magic" to alter the fundamental nature of underlying assets. Tokenized securities remain securities. Therefore, market participants must carefully consider and comply with the relevant provisions of federal securities laws when transacting such instruments.
Sometimes, issuers may tokenize their own securities. Investors purchasing such third-party tokens may face certain unique risks, such as counterparty risk. Issuers of tokenized securities must also consider their disclosure obligations under federal securities laws and may refer to recent staff statements released by the Division of Corporation Finance of the U.S. Securities and Exchange Commission.
Additionally, market participants that issue, purchase, or trade tokenized securities should consider the characteristics of these securities and the associated securities law compliance issues. While blockchain-based tokenization is an emerging technology, the act of "issuing financial instruments representing security rights" is not new. Whether such instruments are issued on-chain or off-chain, the applicable legal requirements remain the same. Therefore, market participants should consider engaging with the U.S. Securities and Exchange Commission (SEC) and its staff when designing their tokenization product frameworks. We are willing to collaborate with market participants to develop appropriate exemption mechanisms and advance the modernization of rules.
