SEC’s Hester Peirce Gives a “Green Light, With Rules” for Tokenization

• Hester Peirce supports market-led tokenization models but insists on compliance with U.S. securities law.
• Tokenized assets must follow disclosure rules and cannot bypass legal requirements.
• The SEC will use existing authority to guide crypto and tokenization oversight without waiting for new legislation.

SEC Commissioner Hester Peirce stated that the market, not regulators, should determine which tokenization models succeed. In an interview on August 12, she said the SEC is open to working with different approaches but stressed that tokenized securities remain subject to existing laws. Peirce underlined that clear disclosure of a tokenized asset’s nature is essential, especially when it is a security with unusual characteristics.

Peirce’s comments come as everyone from major banks to crypto startups is exploring how to bring real-world assets like stocks and bonds onto the blockchain to improve efficiency and transparency. But regulatory uncertainty has been a major hurdle.

Security on a Blockchain Is Still a Security

In her July 9 statement titled “Enchanting, but Not Magical”, Peirce reaffirmed that blockchain does not alter the legal classification of an asset. A security issued in tokenized form remains a security under U.S. law. She warned that third-party-issued tokens, such as receipts for securities or security-based swaps, carry specific legal and investor risks.

Peirce emphasized that issuers and distributors must meet disclosure obligations and ensure compliance with federal securities regulations. She cautioned that tokenization cannot be used as a way to bypass legal requirements, adding that investors should receive accurate information about the products they buy.

The commissioner also highlighted the SEC’s readiness to work with companies experimenting with tokenization, noting that a flexible approach could encourage innovation while maintaining investor protections. She has advocated for regulatory sandboxes and other engagement methods to address emerging technologies.

Balancing Innovation and Investor Protection

Peirce leads the SEC’s Crypto Task Force, which works to modernize the agency’s approach to digital assets. She said the commission will not wait for new legislation to address crypto and tokenization, instead using its existing authority to provide clarity and adapt oversight.

What about other products? Peirce has also been open to innovation elsewhere. Here’s our story on her hints about an Ether staking ETF.

The rise of tokenization comes as the U.S. financial system considers stablecoin laws and broader blockchain adoption in capital markets. While Peirce supports letting the market determine the best models, she maintained that compliance and transparency are essential.

Proponents highlight benefits such as faster settlement times and wider market access. Peirce’s stance indicates that innovation will proceed only within the framework of current law.

Crypto market drivers. Peirce’s comments come as the crypto market is up. Here’s our analysis of the July CPI report and its impact on crypto.