The U.S. Securities and Exchange Commission has clarified that tokenized securities, whether issuer or third-party sponsored, are still considered securities under federal law. This statement follows meetings where traditional finance firms like Citadel and JPMorgan Chase argued against broad regulatory exemptions for decentralized trading platforms.
The U.S. Securities and Exchange Commission has reiterated that tokenized securities must comply with federal securities laws. “Regardless of its format, the Securities Act requires that every offer and sale of a security must be registered with the Commission unless an exemption from registration is available,” the regulator stated.
The guidance further clarified that stock is an equity security under the law regardless of its on-chain or off-chain format. This statement came after meetings with major Wall Street firms like Citadel and JPMorgan Chase.
Representatives, including those from the Securities Industry and Financial Markets Association, pressed against broad exemptions for platforms trading on-chain stocks. They warned that such exemptions could undermine investor protection and lead to market disruptions.
In a December letter, Citadel Securities called for similar regulation of DeFi platforms handling tokenized securities as their traditional counterparts. The DeFi sector, however, has pushed for legal exemptions, claiming their disintermediated platforms warrant different treatment.
The industry group called Citadel’s arguments “bassless” and “flawed.” The final regulatory framework may result from a compromise between these opposing camps.
Despite the regulatory debate, the tokenized securities sector is gaining traction. User numbers are nearing 300,000, representing 100% growth in January, and the total traded value is approaching $1 billion.
