The head of the Securities & Exchange Commission’s crypto task force said on Wednesday that efforts to “tokenize,” or create digital versions of stocks and other securities, are still governed by federal securities laws.
“Tokenized securities are still securities,” Hester M. Peirce, who is also an S.E.C. commissioner, said in a statement, and “market participants must consider — and adhere to — the federal securities laws when transacting in these instruments.”
Ms. Peirce’s statement is not official S.E.C. policy. But as a longstanding commissioner and leader of the crypto task force, her positions carry a good deal of weight at the regulatory agency. Ms. Peirce was nominated to the S.E.C. by President Trump during his first administration.
A tokenized stock is a digital version of the security that, rather than being tied to a particular stock exchange, can be traded on a blockchain at any time. A blockchain is a digital ledger that, in theory, records all transactions involving cryptocurrencies or other digital assets and is maintained on a network of computers.
The statement from Ms. Peirce, a longtime crypto proponent, comes as some in the crypto industry are pushing to permit investors to trade digital versions of stocks and other assets on their platforms in Europe and the United States. Some critics have worried that the tokenization of assets like shares in private companies that can be traded on the blockchain might mean those digital assets are not subject to federal securities laws.
Ms. Peirce, whose commission recently held a hearing on the issue of tokenization, has long argued that regulators should keep an open mind about new technologies. But in her statement she said crypto companies also need to be mindful of securities laws.
“Blockchain technology has unlocked novel models for distributing and trading securities in a ‘tokenized’ format,” Ms. Peirce said. “As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset.”
Ms. Peirce said that companies that seek to produce and distribute tokenized securities should consider the legal implications of these products. She said those companies should meet with the S.E.C. to see if a tokenized security complies with existing federal laws or discuss with the agency whether there should be changes in the law.
“We stand ready to work with market participants to craft appropriate exemptions and modernize rules,” she said.
In April, Robinhood, a retail brokerage favored by some crypto investors, wrote a letter to Ms. Peirce and the task force describing the benefits of tokenization and urging the S.E.C. to avoid a regulatory environment that “stifles growth and innovation.”
Robinhood recently began offering investors in Europe the chance to trade tokenized shares in OpenAI and SpaceX that are supposed to reflect the valuations of the private companies. Supporters of these offerings have said they provide ordinary investors a chance to invest in hot start-ups — something usually only wealthy investors can do.
Under the Trump administration, the S.E.C. has taken a far more welcoming attitude to crypto than it did during the Biden administration. Ms. Peirce has said the job of the task force is to come up with a regulatory scheme for crypto that encourages innovation without becoming a “haven for fraudsters.”
Matthew Goldstein is a Times reporter who covers Wall Street and white-collar crime and housing issues.
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