January 29, 2026

On January 28, 2026, the Securities and Exchange Commission issued an important statement clarifying how federal securities laws apply to tokenized securities. This guidance, released by the Divisions of Corporation Finance, Investment Management, and Trading and Markets, underscores that the format of a security whether traditional or tokenized does not alter its regulatory obligations.

At its core, the statement defines a tokenized security as follows:

[A] financial instrument enumerated in the definition of “security”[4] under the federal securities laws that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.

Crypto assets here refer to any digital value recorded on such ledgers, while tokenization involves creating these digital representations of assets. The SEC emphasizes that tokenized securities typically arise in two ways: through issuer-sponsored models where the issuer directly tokenizes the security, or third-party models where unaffiliated entities create tokenized versions.

Importantly, the underlying economic reality determines the instrument’s status, not its digital wrapper. This means stock tokenized on a blockchain remains equity, subject to the same registration requirements unless an exemption applies.

Issuer-sponsored tokenized securities involve an issuer creating a security in the form of a crypto asset using distributed ledger technology (DLT).

In the primary model, the issuer (or its agent) integrates DLT directly into the master securityholder file—the official record of ownership. Transfers of the tokenized crypto asset on the blockchain automatically update this onchain master file, which functions as an onchain database. The issuer combines onchain data (e.g., wallet addresses, quantities) with offchain details (e.g., holder names and addresses) for complete recordkeeping. A single security class may be issued in both tokenized and traditional formats, with holders able to convert between them.

Importantly, the format (onchain vs. offchain) does not alter federal securities law obligations: registration requirements under the Securities Act, definitions such as “equity security,” and other rules apply equally regardless of issuance method. However, tokenized versions may constitute a distinct class if rights differ materially; substantially similar rights and privileges may classify them as the same for certain regulatory purposes.

An alternative approach issues the security offchain while providing a separate crypto asset to holders. Here, the crypto asset carries no direct security rights and does not form part of the master file. Instead, transferring the token notifies the issuer to update the offchain master record, enabling indirect onchain-facilitated transfers while keeping official ownership offchain.

Third-party-sponsored tokenized securities involve unaffiliated entities tokenizing securities issued by others, using models that differ from direct issuer-sponsored tokenization. The resulting crypto assets may or may not replicate the rights, obligations, or benefits of the underlying security, and holders face additional risks (e.g., third-party bankruptcy) not present with direct ownership.

Two primary models exist:

Custodial Tokenized Securities (e.g., Tokenized Security Entitlement) A third party holds the underlying security in custody and issues a crypto asset representing a security entitlement—an indirect interest in the held asset. The entitlement can be recorded using distributed ledger technology (DLT) integrated into the third party’s systems, so transferring the crypto asset updates the entitlement record onchain. Alternatively, records remain offchain, with onchain transfers used to sync and update the offchain database. The format (crypto or traditional) does not alter federal securities law applicability.

Synthetic Tokenized Securities The third party issues its own crypto asset providing synthetic (indirect) exposure to the underlying security, without any direct obligation from or rights against the original issuer.

• Linked Security: A third-party-issued security (e.g., structured note as debt or exchangeable stock as equity) whose value or returns track the referenced security or related events. It functions like issuer-sponsored tokenized assets but offers only economic linkage.
• Security-Based Swap : A tokenized swap providing synthetic exposure to a single security, narrow-based index, or issuer-related events (per Exchange Act §3(a)(68) and CEA definitions). It typically conveys no equity, voting, or informational rights. Sales to non-eligible contract participants require Securities Act registration and exchange trading unless exempt. The crypto asset mirrors issuer-sponsored forms but faces distinct regulatory rules.

Linked securities and security-based swaps are economically similar, but security-based swaps trigger additional regulations (e.g., counterparty limits). Classification depends on whether the instrument qualifies as a “swap” and meets security-based swap criteria—or falls under exclusions (e.g., certain notes, options, or securities under the Securities Act/Exchange Act). Economic substance, not labeling, governs the determination.

Overall, this statement reinforces that innovation must fit within established frameworks. Tokenization does not exempt securities from disclosure, registration, or anti-fraud provisions.

The SEC’s statement can be found here.

The post “SEC 2026 Tokenized Securities Guidance Explained” first appeared on DigitalAsset.Law on January 29, 2026.