Putting digital versions of stocks on a blockchain doesn’t mean companies can skirt U.S. securities laws, the Securities and Exchange Commission’s Hester Peirce said Wednesday.
“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset,” Peirce said in an online post. “Tokenized securities are still securities.”
Companies including Coinbase Global Inc., Kraken and Robinhood Markets Inc. are considering letting customers trade tokens that represent shares of equities on a blockchain, with some products debuting overseas.
Peirce’s remarks are notable because she chairs the agency’s cryptocurrency task force and is considered an opponent of regulation that discourages growth in the crypto industry. She was appointed to the commission in 2018 by Donald Trump during his first term as president.
Traditional financial firms have raised red flags about tokenization. SIFMA, a trade group that represents broker dealers, investment banks and asset managers, warned in June that the SEC shouldn’t fast-track requests to let digital asset firms trade tokenized securities.
One area of concern for the groups is that digital asset firms could bypass securities laws that require know-your-customer and anti-money laundering protections as well as proper safeguarding of customer assets.
“These types of significant structural changes should be considered and made through an open and transparent process which allows for public notice and comment, oversight, and broad industry engagement to help the commission and the public to fully understand the policy implications of such changes,” the group wrote.
Firms considering tokenization product offerings should meet with the SEC, Peirce said in her statement. The agency is “ready to craft appropriate exemptions and modernize rules,” she said.
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