tl;dr
Hester Peirce, head of the SEC’s Crypto Task Force, stated that tokenizing securities on a blockchain does not alter their legal status; they remain subject to federal securities laws. She described two tokenization methods: issuers minting their own blockchain shares and custodians wrapping third-p...
Hester Peirce, head of the US Securities and Exchange Commission’s Crypto Task Force, clarified that placing securities on a blockchain does not change their fundamental nature. She emphasized in a July 9 statement that tokenized shares, notes, or entitlements remain securities and thus must comply with existing federal laws during creation, sale, or transfer.
Peirce outlined two methods of tokenization: issuers minting blockchain versions of their own shares, or custodians wrapping third-party securities and issuing receipts. She cautioned that the latter introduces counterparty risk, as token holders depend on the custodian's solvency and control over the underlying assets. Peirce urged distributors to follow the SEC's disclosure guidelines and engage with agency staff early to seek exemptions if needed. She also noted that certain token types might be classified as "receipts for a security" or "security-based swaps," which are restricted from off-exchange retail trading, emphasizing that legal requirements apply equally to both on-chain and off-chain instruments.
The remarks coincide with growing activity in tokenized equities. Solana-based stock tokens under Backed Finance’s xStocks framework reached a market value exceeding $50 million by early July. Expansion continues as BNB Chain announced the listing of Apple, Tesla, and other tokenized equities as BEP-20 assets from a partnership involving Kraken and Backed Finance, offering users round-the-clock access and DeFi integration. Market participants responded positively, with Backed Finance co-founder Adam Levi highlighting xStocks’ design to maintain straightforward regulatory compliance. Kraken confirmed that DeFi features on BNB Chain would allow users to use tokenized stocks as collateral without changing their securities status. Separately, Bitget integrated xStocks into its platform, enabling seamless token trading without additional wallets.
Peirce concluded by expressing the SEC’s willingness to collaborate with market participants to develop exemptions and modernize rules, aiming to address regulatory gaps exposed by evolving blockchain technologies.