US SEC Issues Statement on Tokenized Securities: Tokenized Securities Are Still Securities and Must Comply with Existing Regulations

On July 10, the US SEC issued a statement on the tokenization of securities, as follows: Blockchain technology has opened up new models for issuing and trading securities in the form of "tokenization." Tokenization has the potential to facilitate capital formation and enhance investors' ability to use their assets as collateral. However, despite the great potential of blockchain technology, it does not have the "magic" to change the nature of the underlying assets. Tokenized securities are still securities. Therefore, market participants must carefully consider and comply with the relevant provisions of federal securities laws when trading such instruments. Sometimes, issuers tokenize their own securities. Investors who purchase such third-party tokens may face some unique risks, such as counterparty risk. Issuers of tokenized securities must also consider their disclosure obligations under federal securities laws and may refer to relevant staff statements recently issued by the SEC's Division of Corporation Finance. At the same time, market participants who issue, purchase, and trade tokenized securities should also consider the attributes of these securities and the securities law compliance issues they raise. Although blockchain-based tokenization is an emerging technology, the act of "issuing financial instruments that represent rights to securities" is not new. Whether such instruments are issued on-chain or off-chain, the applicable legal requirements are the same. Therefore, market participants should consider communicating with the US Securities and Exchange Commission (SEC) and its staff when designing their tokenization product plans. We are willing to cooperate with market participants to develop reasonable exemption mechanisms and promote rule modernization. [Deep Tide TechFlow]