Tokenization has moved past the theoretical stage. Exchanges have been cleared to trade certain securities in tokenized form, blockchain-based transfer agents are registering with regulators, and the SEC is revisiting foundational rules for ownership records maintained on distributed ledgers. For companies, the question is no longer whether a tokenized security is a security. It is how the rules governing ownership records, transfer agents, custody, settlement and secondary trading apply when the security lives on blockchain infrastructure.
For several years, the debate centered on whether a given token was a security. SEC staff has now answered the question that matters to most operating companies: a security formatted as, or represented by, a crypto asset remains a security, and the format in which ownership is recorded does not change the analysis. The applicable registration, disclosure and intermediary requirements do not disappear merely because the security is represented on a blockchain. The practical work has therefore moved downstream—to how the instrument is issued, recorded, held, transferred, traded and settled.
The SEC Begins to Build an Architecture for Tokenized Securities
The SEC’s January 2026 Staff Statement on Tokenized Securities organizes tokenization into four broad models. Issuer-sponsored structures may be integrated, where the token is the security itself and the issuer’s on-chain record is part of its securities infrastructure, or non-integrated, where the token is linked to a security that remains recorded off-chain. Third-party structures may be custodial, where the third party holds the underlying securities that back the token, or synthetic, where it does not hold the underlying and the token represents a separate claim or exposure. These are not merely technical variations. Depending on the model, a holder may own the security itself or a claim against an intermediary. That distinction can mean different rights in an insolvency, different disclosure considerations and, in some structures, the possibility that the instrument is a security-based swap. The practical takeaway is straightforward: architecture matters. Companies should identify who maintains the authoritative ownership record, what the token legally represents, which party owes the holder what, and what happens when it moves.
Transfer Agency and the Ownership Record Take Center Stage
The SEC has proposed the first substantial overhaul of its transfer agent rules since the late 1970s and early 1980s, aimed squarely at this problem. SEC staff has already recognized that a distributed ledger may constitute all or part of a transfer agent's official master securityholder file. The Commission's September 2026 proposal takes the next step, proposing to modernize the transfer-agent rules themselves for an environment in which securities records may be maintained electronically and on blockchain infrastructure. It also asks whether the recordkeeping rules adequately support hybrid systems in which on-chain data, such as wallet addresses and share quantities, is linked to off-chain data, such as holder names and addresses, so that a blockchain transfer produces a corresponding change to the official record. Related proposals would replace certificate-era safeguarding requirements with a risk-management framework covering cybersecurity and business continuity, and would clarify requirements for removing restrictive legends and documenting client agreements. The comment period is open. Whatever the final rules, the direction of travel is clear: the ledger is being treated as potential securities infrastructure, not merely as a wrapper around it.
Tokenization Does Not Make Market-Structure and Custody Rules Disappear
Following staff relief for a clearing agency tokenization pilot, rule changes took effect permitting Nasdaq and NYSE markets to accommodate trading of certain securities in tokenized form, and blockchain-based transfer agents have registered with the Commission. These developments also raise an important issue for public companies: tokenization may increasingly become a feature of market infrastructure rather than an issuer-led initiative. As exchange, clearing and transfer-agent infrastructure develops, issuers may confront tokenized forms of their securities even where tokenization was not part of the issuer's original capital-markets strategy. Private companies exploring tokenized capitalization tables, fund interests or secondary liquidity for employees and early investors now have registered service providers to evaluate—and correspondingly less justification for informal arrangements.
Moving from issuance into actual trading is where familiar questions return in unfamiliar form—and where the seams matter most.
- Classification: Are tokenized and conventional shares the same class for corporate and securities law purposes?
- Best execution: How do order-protection and best-execution requirements operate when the same security trades in two formats?
- Custody: For broker-dealer custody purposes, who has possession and control when the asset sits in a wallet?
- Transfer restrictions: How do negotiated transfer restrictions and legends function against a token that can move peer-to-peer in seconds and across borders?
- Settlement: Where does settlement become final, and who bears the risk before that point? The hardest problems arise at the seams between blockchain systems and traditional market plumbing, not within either one in isolation.
What Companies Should Be Thinking About Now
Companies considering tokenization should resolve five questions early:
- what legal interest the token represents;
- which record constitutes the authoritative ownership record;
- who performs transfer agent and custody functions;
- how on-chain transfers interact with off-chain records; and
- how the asset will actually trade and settle. These architectural decisions are not implementation details — they drive the regulatory consequences of the structure.
