On January 28, 2026, the U.S. Securities and Exchange Commission’s (SEC) Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets issued a Statement on Tokenized Securities (the Statement) to clarify the application of federal securities laws to tokenized securities. This guidance is significant because blockchain-based representations of traditional assets are becoming more prevalent, but market participants often lack clarity on how such instruments fit within the established regulatory framework.
The Statement defines a tokenized security as a financial instrument that already meets the definition of a “security” under the federal securities laws but that is formatted as or represented by a crypto asset with ownership records maintained in whole or in part on one or more crypto network. The Statement does not create new rules or exemptions. Instead, it makes clear that the federal securities laws still apply to securities that have been tokenized. The Statement focuses on two broad categories of tokenized securities intended to help issuers, intermediaries, and investors understand the regulatory implications of different approaches to tokenization.
Issuer-Sponsored Tokenized Securities
In this model, the entity that originally issues the security, or its agent, creates and maintains a tokenized version on a blockchain or similar distributed ledger. This could be through (1) the issuance of a security in a tokenized form, using the blockchain as the master securityholder file or (2) issuing a security offchain and using a token to effect transfers of the security on the master securityholder file. The technological shift from traditional paper or electronic registries to blockchain does not alter the basic nature of the security; it remains subject to the same disclosure, registration, and investor protection requirements.
Third Party-Sponsored Tokenized Securities
In this category, third parties may tokenize securities of the unaffiliated issuer. This third party creates a blockchain-based representation of an existing security, often to facilitate trading, settlement, or alternative access to the asset. The SEC identifies two submodels within the third-party category, each with distinct operational and legal characteristics:
Custodial Tokenized Securities
Under the custodial model, the third party tokenizes a security by creating a security entitlement that is formatted as a crypto asset. The tokenized security represents the holder’s indirect interest in the underlying security via the security entitlement. Alternatively, a third party may tokenize a security without using a crypto network to record entitlement holders. Instead, the records are kept offchain and the third party uses an onchain database to update the offchain records and transfers of the security.
Synthetic Tokenized Securities
Under the synthetic model, the third party creates a separate tokenized security that provides synthetic exposure to the underlying security. The Statement identifies two versions of a synthetic tokenized security: (1) linked securities and (2) security-based swaps.
A linked security is a security issued by the third party that provides synthetic exposure to the underlying security but is not an obligation of the issuer of the underlying security and confers no rights or benefits from the issuer. A linked security may be a debt security or an equity security and functions similarly to an issuer-sponsored tokenized security.
A security-based swap is a linked security that meets the definition of a swap under the Securities and Exchange Act of 1934. This may include any swap agreement, contract, or transaction based on “(1) an index that is a narrow-based security index, including any interest therein or on the value thereof; (2) a single security or loan, including any interest therein or on the value thereof; or (3) the occurrence, nonoccurrence, or extent of the occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrow-based security index, provided that such event directly affects the financial statements, financial condition, or financial obligations of the issuer.” Third party issuers should carefully evaluate whether their tokenized security meets the definition of a security-based swap because it may include additional obligations under the Commodity Exchange Act.
