On January 28, the SEC issued a statement clarifying the application of federal securities laws to tokenized securities, which are financial instruments represented by digital assets and recorded on distributed ledger technology. The SEC outlined two main categories: (i) issuer-sponsored tokenized securities, where issuers integrate “crypto networks” into their recordkeeping systems; and (ii) third-party-sponsored tokenized securities, which include custodial and synthetic models. The agency emphasized that regardless of format — on-chain or off-chain — federal securities laws apply equally, requiring registration of offers and sales unless an exemption applies.

The SEC also addressed models where third parties tokenize securities, distinguishing between custodial tokenized securities, which represent indirect ownership interests, and synthetic tokenized securities, which provide synthetic exposure to underlying assets. The agency noted that security-based swaps formatted as digital assets are subject to additional regulatory requirements, including restrictions on sales to non-eligible contract participants and the necessity for registration and exchange trading.