The SEC categorizes tokenized securities into issuer-sponsored and third-party models. It explained the regulatory compliance requirements under federal securities laws.
The U.S. Securities and Exchange Commission (SEC) has released new guidance to clarify how federal securities laws apply to tokenized securities.
The statement, issued jointly by the Division of Corporation Finance, the Division of Investment Management and the Division of Trading and Markets on January 28, categorizes tokenized securities into two main types: issuer-sponsored and third-party sponsored securities.
Issuer-sponsored tokenized securities
According to the SEC, a tokenized security is a financial instrument that meets the legal definition of a ‘security’. It is represented or formatted as a crypto asset, while ownership information is maintained on one or more crypto networks.
In the issuer-sponsored model, the issuer or its agent integrates distributed ledger technology (DLT) into its systems so that transfers of the crypto assets on the network correspond to transfers in the official master securities file.
Issuers can offer securities in multiple formats, and a tokenized security can be considered of the same class as its traditional counterpart if the rights and privileges are “substantially” similar. In some cases, issuers can issue a crypto asset that does not integrate directly with the main security holder’s file, but can be used to perform ownership transfers that are recorded off-chain, because explained by the securities agency.
Third party issuance: custody or synthetic
The second category includes third-party sponsored tokenized securities, where entities not affiliated with the issuer tokenize the securities of another party. These can take the form of tokenized securities in custody or synthetic tokenized securities. Custody of tokenized securities occurs when a third party issues a crypto asset that represents an ownership interest in another company’s security. The ownership information for these crypto assets can be maintained on-chain or off-chain by a third party.
On the other hand, synthetic tokenized securities include linked securities and security-based swaps, which provide exposure to the underlying security but do not grant any rights to the original issuer. Security-based swaps issued as crypto assets may only be offered to eligible contract participants unless they are registered with the SEC and traded on a national securities exchange.
You might also like:
The guidance also states that the classification and format of tokenized securities does not change their treatment under the federal securities laws, and that the SEC remains available to engage with market participants seeking clarity or preparing filings. This statement is intended to help companies and investors navigate the legal landscape for tokenized securities while complying with existing registration and disclosure requirements.
SECRET PARTNERSHIP BONUS for CryptoPotato readers: Use this link to register and unlock $1,500 in exclusive BingX Exchange rewards (limited time offer).
#SEC #sets #clear #rules #tokenized #securities #splits #major #categories