SEC's Hester Peirce: 'Tokenized securities are still securities' as companies ramp up efforts

As companies ramp up efforts to bring tokenized stocks to the U.S., the U.S. Securities and Exchange Commission's Hester Peirce is drawing a line in the sand — tokenized securities are securities and must therefore follow federal securities laws.

"As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset," Commissioner Peirce said in a statement on Wednesday. "Tokenized securities are still securities."

Some crypto firms, including Coinbase and Kraken, have shown interest in launching tokenized equities. If they receive approval from the SEC, that could enable them to offer blockchain-based trading of traditional stocks, putting them in direct competition with other, more traditional finance brokerages.

During an interview with CNBC last week, SEC Chair Paul Atkins described tokenization as an "innovation" that could lead to more efficient markets. The demand for these assets is unclear, according to previous reporting from The Block.

Peirce's comments follow concerns raised during a Senate Banking Committee hearing on digital assets. Top Democrat of that committee, Sen. Elizabeth Warren, said a crypto market structure bill, soon to be voted on in the House, called the Clarity Act, includes "language that would allow non-crypto companies to tokenize their assets to evade the SEC’s regulations."

"Under the House bill, a publicly-traded company like Meta or Tesla could simply decide to put its stock on the blockchain and POOF! it would escape SEC regulation," Warren said in prepared remarks.

Peirce's statement, released after the hearing, said that those distributing tokenized securities must "consider their disclosure obligations under the federal securities laws."

In a post on X, Bloomberg Intelligence ETF analyst James Seyffart said Peirce's clarification felt like a warning to firms.

"This feels like a bit of a warning to all the companies and protocols planning to build bridges for tokenizing securities," Seyffart said. "A sort of 'hey, pay attention here.' This SEC is more accommodative toward crypto but they're not 'Go ahead & ignore securities laws; accommodative."