On July 9, Hester Peirce, head of the SEC's cryptocurrency working group, recently stated that tokenized assets do not change the nature of their underlying assets.
Pierce pointed out that whether it is tokenized stocks, notes, or equity, they still belong to the nature of securities and require issuers, intermediaries, and traders to comply with existing federal laws when creating, selling, or transferring these assets.
Issuance pathways and regulatory rule definitions
Pierce explained that issuers who want to achieve asset tokenization can do so in two ways: first, by converting their company's stock into a blockchain version, or second, by having a third-party securities company package and issue notes. The second model introduces counterparty risk, as token holders must rely on the custodian's solvency and control over the underlying stock.
She urged distributors to refer to the SEC's corporate finance division's 'staff statement' regarding financial disclosure obligations and requested that distributors meet with agency staff as soon as possible when applying for tailored exemptions.
Pierce also noted that existing rules may classify certain specific tokens as 'security receipts'; however, if these tokens do not possess ownership rights, they may be defined as 'derivative contracts based on securities,' and such contracts are prohibited from being traded to off-exchange retail clients.
Market trend of asset tokenization in the stock market
Pierce's statement comes at a time when the tokenized stock market is experiencing explosive growth, and market data corroborates this trend.
According to on-chain data tracked by RWA.xyz, the market capitalization of Solana stock tokens issued under Backed Finance's xStocks framework surged from $469 million on June 20 to nearly $515 million currently.
Additionally, xStocks is actively expanding to other platforms. BNB Chain announced it will collaborate with Kraken and Backed to launch equity tokens for Apple, Tesla, and others as BEP-20 assets, providing 24-hour access and DeFi composability services.
Market response and exemption space for industry participants
The market has responded quite positively; Backed Finance co-founder Adam Levi stated that their product design follows the logic of traditional securities custody, enabling seamless integration with existing regulatory frameworks. Kraken added that even when used as collateral in DeFi scenarios, the securities attributes of these tokens remain unchanged.
Additionally, Bitget integrated xStocks into its on-chain platform on July 9, allowing customers to trade the same tokens from their spot accounts without a separate wallet.
Notably, in the face of a rapidly evolving market landscape, Pierce concluded by stating that the European Commission holds an open attitude towards modernization and is willing to collaborate with industry participants.
This move aims to modernize the regulatory framework while maintaining the core principles of securities regulation through the establishment of targeted exemption clauses.
In summary, Pierce's statement provides flexibility in balancing technological innovation and investor protection, reflecting the regulatory agency's recognition of the transformative potential of blockchain technology.
