SEC Staff Provides Its Views on Taxonomies Associated With Tokenized Securities
On January 28, 2026, the Securities and Exchange Commission's ("SEC") Divisions of Corporation Finance, Investment Management, and Trading and Markets (collectively, the "Staff") issued a statement (the "Statement") providing guidance to market participants related to tokenized securities and compliance with relevant federal securities laws.
The Statement explains that tokenized securities fall into two broad categories: issuer-sponsored and third-party sponsored.
Issuer-sponsored. The Statement recognizes that a single class of security may be issued in multiple formats—e.g., securities issued in book entry format (like traditional securities) and securities issued in a tokenized format. Issuers may tokenize a security by integrating distributed ledger technology ("DLT") into the systems that it uses to record owners of the security (i.e., the master securityholder file) so that an on-chain transfer results in a transfer of the crypto security on the master securityholder file. An issuer may also issue an off-chain security together with a separate crypto non-security asset to notify the issuer or its transfer agent of ownership changes so that they can then update the off-chain master securityholder records to reflect those transfers. The Statement notes that the format of the issuance and the method of recording ownership of the security does not change the application of federal securities laws.
Third-party sponsored. The Statement identifies two main models where a third party tokenizes securities issued by another person: (i) custodial; and (ii) synthetic.
- Custodial—where a third party issues a crypto asset evidencing a security entitlement in an underlying security held in custody. In this model, DLT may be used to record securities entitlement holders, such that an on-chain transfer of the asset constitutes transfer of the security entitlement, or the on-chain transactions may be used to update the third party's off-chain ownership records. The Statement clarifies the format in which the security entitlement is issued does not affect application of federal securities laws.
- Synthetic— where a third party issues a crypto asset representing its own security that provides synthetic exposure to the underlying security. This can be a linked security or a security-based swap, which are economically similar. The classification depends on the availability of exclusions from the "swap" definition, with the instrument’s economic reality determining whether it is excluded. If a financial instrument is a security-based swap, additional or different regulatory provisions apply under federal securities laws (including restrictions limiting transactions in these instruments to eligible contract participants).
The SEC's views on the taxonomies associated with tokenized securities promote its initiative to provide a clear crypto asset regulatory framework. The new guidance will help market participants comply with federal securities laws, and prepare any necessary registrations, proposals, or requests for action to the SEC. The SEC encourages questions from interested market participants.
