Securities Regulation Daily Wrap Up, BLOCKCHAIN—SEC staff clarify views on taxonomies for tokenized securities, (Jan 29, 2026)

By Anne Sherry, J.D.

Securities can be tokenized by or on behalf of their issuers or by unaffiliated third parties.

Three SEC divisions issued a statement clarifying their views on the taxonomies associated with tokenized securities. The statement by the Divisions of Corporation Finance, Investment Management, and Trading and Markets organizes tokenized securities by whether they are issuer-sponsored or third party–sponsored. A third party–sponsored tokenized security, in turn, may be either custodial or synthetic. The statement explains the staff’s view that the economic nature of an instrument, and not its format or moniker, determines its standing under the federal securities laws.

Issuer-sponsored tokenized securities. The staff explain that the difference between a security issued in traditional format and one issued through tokenization is that in the latter case, the issuer or its agent maintains the master securityholder file on one or more crypto networks. This recordkeeping system involves the parallel use of onchain database records (such as the wallet address and issue date) and offchain database records (such as the securityholder name and address).

The Securities Act requires that an offer or sale of a security, whether it is onchain or offchain, be registered unless an exemption applies. Similarly, stock is an equity security regardless of its format.

The securities laws may also treat a tokenized security as being of the same class as a security issued in traditional format, if the two are of substantially similar character and the holders enjoy substantially similar rights and privileges.

The statement also clarifies that when an issuer issues a security offchain and issues a crypto asset to securityholders, the later transfer of the crypto asset is a securities transaction that operates to notify the issuer or its agent to record the transfer of ownership on the offchain master securityholder file.

Third party–sponsored tokenized securities. Third parties are also tokenizing the securities of unaffiliated issuers using various models, resulting in crypto assets that may or may not have materially different rights, obligations, and benefits from those of the underlying security. The holder of the crypto asset may or may not have any rights as a holder of the underlying security, and the crypto asset holder may be exposed to more risks than a holder of the underlying security, such as in a bankruptcy of the issuer.

The statement further categorizes these securities tokenized by third parties under two models: custodial tokenized securities and synthetic tokenized securities.

Custodial tokenized securities. In a custodial model, the underlying security is held in custody, and the third party issues a crypto asset evidencing the holder’s ownership interest. The statement clarifies that the format of the security entitlement does not affect application of the federal securities laws.

Synthetic tokenized securities. In the synthetic model, the third party issues a crypto asset representing its own security that provides synthetic exposure to the underlying security, such as a tokenized linked security or a tokenized security-based swap.

A “linked security” is a security issued by the third party itself that provides synthetic exposure to a referenced security. A linked security may be a debt or equity security.

A synthetic tokenized security—including a linked security—may also be a security-based swap if it meets one of the three prongs of Exchange Act Section 3(a)(68). The statement offers two examples of crypto assets whose mechanics would bring them under the definition of security-based swap:

• a crypto asset that provides on an executory basis for the exchange, on a fixed or contingent basis, of one or more payments based on the value of a security, but does not also convey a current or future direct or indirect ownership interest in an asset or liability that incorporates the financial risk transferred;

• a crypto asset that provides for payments that are dependent on the occurrence, non-occurrence or extent of occurrence of an event or contingency that is associated with a potential financial, economic, or commercial consequence, does not fall within one of the specified exclusions from the definition of “swap,” and meets any of the three prongs of the security-based swap definition.

The statement notes that security-based swaps are economically similar to linked securities but are subject to additional or different regulatory provisions. If a financial instrument falls into one of the exclusions from the definition of “swap” relating to securities, it is not a swap at all, and therefore not a security-based swap. Any note, bond, or evidence of indebtedness that is a security, or any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, is not a swap. Whether a crypto asset satisfies one of these exclusions depends on the economic reality of the instrument, not the name given to the instrument.

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