US SEC Commissioner: Tokenized Securities Are Still Securities in Essence, Issuers Must Comply with Securities Law Disclosure Requirements

Odaily Planet Daily News — Hester Peirce, a commissioner of the U.S. SEC, stated in a post today that tokenized securities are, by nature, still securities. Therefore, market participants must fully consider and strictly comply with federal securities regulations when trading such instruments.
Tokenization of securities may be carried out by issuers themselves—for example, industrial or investment companies may tokenize their shares; it may also be operated by custodial institutions holding third-party issued securities. Such institutions might issue tokens linked to the securities they hold in custody, or tokenize the “securities interests” that investors have in the custodian. Purchasers of these third-party tokens may face unique counterparty and other specific risks.
Issuers of tokenized securities must fulfill the disclosure obligations stipulated by federal securities laws. When distributing, purchasing, and trading tokenized securities, market participants should carefully assess the legal attributes of these securities and the corresponding regulatory requirements.
When designing tokenized product solutions, market participants are encouraged to proactively communicate with the SEC and its staff. If technical features necessitate adjustments to existing rules, or if regulatory requirements have become outdated or ineffective, the SEC is willing to work with the industry to develop reasonable exemptions and promote a regulatory framework that keeps pace with the times.