The SEC has clarified that tokenized assets are classified as securities under federal law, requiring compliance with registration and disclosure.
The U.S. Securities and Exchange Commission (SEC) has clarified that tokenized assets are classified as traditional securities, fully subject to federal regulations. According to the SEC, these financial instruments are structured as crypto assets, with ownership records maintained on one or more blockchains.
“A tokenized security is a financial instrument defined as a 'security' under federal laws,” the SEC stated.
This classification applies regardless of whether the assets are issued on-chain or off-chain, meaning that issuers must comply with existing registration and disclosure obligations.
The SEC has outlined two primary types of tokenized securities:
- Issuer Tokenized Securities: These involve a direct blockchain integration for ownership records, where transfers on the network legally signify ownership changes.
- Third-Party Tokenized Securities: In this category, a custodian holds the underlying asset, and the token serves as a claim to it, governed by existing securities laws.
Additionally, the SEC noted that related securities, such as synthetic products and derivatives tied to these assets, may also fall under this classification, though they carry stricter requirements for counterparties.
Unresolved Regulatory Questions
While the SEC has established guidelines for tokenized assets, it has not clarified whether cryptocurrencies or staking programs are classified as securities. A notable case is Ethereum, which has been the subject of an SEC investigation since early 2023, with speculation about its status as a security.
Despite previous indications from SEC Chairman Gary Gensler avoiding a definitive stance on Ethereum’s classification, the case was eventually closed without charges or further explanation. The ongoing ambiguity surrounding crypto asset regulation remains a critical issue for market participants.
