The Securities and Exchange Commission has published formal guidance on how federal securities laws apply to tokenized securities, providing a classification framework for assets recorded on distributed ledgers.
The joint statement, released January 28 by the SEC’s Divisions of Corporation Finance, Investment Management and Trading and Markets, defines a tokenized security as a traditional security formatted as a crypto asset with ownership recorded on a blockchain. The guidance makes clear that the technological format, whether records are kept onchain or offchain, does not alter the legal status or registration requirements of the underlying instrument.
Two Main Structures
The SEC outlined two primary pathways for tokenization. In issuer-sponsored tokenization, the company behind the security natively issues or adopts the tokenized format. Third-party sponsorship involves an external entity creating the tokenized representation.
Third-party models fall into two categories. Custodial arrangements, also called tokenized entitlements, involve tokens representing a right to a security held in custody. Synthetic structures use derivative contracts to link a token’s value to a security without direct ownership.
The guidance arrives as tokenized real-world assets have reached approximately $36 billion in market value, with institutional interest accelerating.
DTCC Tokenization Pilot
The statement follows recent regulatory developments. In December 2025, the SEC granted no-action relief to the Depository Trust Company for a tokenization pilot covering Russell 1000 equities, US Treasuries and major ETFs. That programme is expected to launch in the second half of 2026.
Wall Street firms including JPMorgan and Citadel met with the SEC’s Crypto Task Force on January 27, advocating for modernised infrastructure while maintaining investor protections. Representatives argued that tokenization should improve market mechanics without relaxing standards that apply to traditional exchanges.
Commissioner Response and Legislation
SEC Commissioner Hester Peirce welcomed the guidance but noted its limitations. “Staff statements provide interpretive comfort but lack legal force,” she said, adding that broker-dealers operating under such guidance remain exposed to potential shifts in enforcement philosophy.
A bipartisan Senate bill introduced in late January seeks to codify these standards into formal commission rules.
