- The SEC says a security remains a security, even if it is issued or tracked on a blockchain.
- Companies issuing tokenized shares or bonds must still register them and meet disclosure requirements.
- Regulators will judge tokenized products by their economic reality, not by what they are called.
U.S. regulators have released fresh guidance explaining how existing securities laws apply to tokenized securities, aiming to reduce confusion as blockchain-based finance grows.
On January 28, 2026, staff from the U.S. Securities and Exchange Commission said that turning a security into a crypto token does not change its legal status under federal law.
What the SEC Means by a Tokenized Security
A tokenized security is still a traditional security, such as a stock, bond, or similar financial instrument, but issued or represented using blockchain technology. Ownership records may be kept on a crypto network instead of a traditional database.
Issuer-Led Tokenization: Same Security, New Format
In issuer-led models, the company that issues the security also issues it in tokenized form. Transfers on the blockchain directly update the official ownership records.
The SEC says this is functionally no different from issuing securities through traditional systems. The only real change is that blockchain replaces conventional databases.
Crucially, the regulator emphasizes that:
- Securities must still be registered unless an exemption applies
- Disclosure obligations remain unchanged
- Token format does not affect investor protections
Even if a company allows investors to convert between traditional and tokenized formats, the legal treatment stays the same.
Tokenization Does Not Create a “New” Asset Class
The SEC also addresses a common argument in crypto markets: that tokenized versions of securities should be treated as separate instruments.
Regulators push back on this idea. If a tokenized security has substantially similar rights and characteristics to its traditional version, it may still be considered part of the same class under securities law.
This is a clear warning against attempts to repackage existing securities to bypass regulatory rules.
Third-Party Tokenization Comes With Higher Risk
The statement becomes more careful when discussing third-party tokenization, where someone other than the issuer creates a token linked to an existing security.
The SEC discusses two main models:
- Custodial tokenized securities, where the real asset is held in custody, and the token represents an entitlement to it.
- Synthetic or linked tokens, which do not represent ownership but instead track the price or performance of the underlying security.
In these cases, token holders may face additional risks, including exposure to the third party’s financial health or bankruptcy, risks that traditional security holders may not face.
Synthetic Tokens Face Tighter Restrictions
The SEC also explained that some tokenized products may qualify as security-based swaps, which are subject to stricter rules.
These products often:
- Do not provide ownership or voting rights
- Offer price exposure only
- Are restricted to eligible institutional participants unless registered
The regulator makes it clear that labels do not matter. What matters is how the product actually behaves economically. Hence, the SEC’s latest guidance strips away much of the ambiguity around tokenized securities.
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