SEC Issues Structured Guidance on Tokenized Securities, Tilting Infrastructure Toward Brokered Custody

The Securities and Exchange Commission released targeted guidance that classifies tokenized securities into two principal groups—issuer-originated tokens where an issuer integrates distributed‑ledger records into its official ownership systems, and third‑party‑originated tokens created by unaffiliated intermediaries. The statement underscores that shifting registers onto blockchains does not alter the applicability of federal securities statutes: registration, disclosure, custody and market‑structure duties continue to govern tokenized instruments. Within third‑party models, the SEC distinguishes custodial claim tokens (where legal title rests elsewhere) from synthetic exposure arrangements (which replicate economic returns without transferring legal ownership), and it flagged different operational and legal vulnerabilities for each. The agency singled out custody and counterparty insolvency risk as central concerns, effectively steering market design toward intermediary custody models that replicate broker‑dealer protections rather than native self‑custody. The guidance arrives amid industry engagement with the SEC—meetings between banks, broker‑dealers, law firms and agency officials had already emphasized that tokenization changes settlement plumbing but not the economic rights that define securities, and attendees urged harmonized rulemaking to avoid piecemeal exemptive approaches. Parallel inputs to the agency include public comments and drafts proposing graded, checklist‑style taxonomies and even new categories for ambiguous tokens; these filings press for clearer allocation of SEC and CFTC authorities and for standards that reduce classification uncertainty. The SEC paper also complements technical work by market utilities to enable tokenized instruments within existing clearing and settlement architectures, suggesting a path for legacy infrastructure to interoperate with distributed ledgers. Market participants—including trading platforms and custodians—have welcomed the clarification for reducing legal ambiguity, while noting that compliance costs, reconciliation needs and bankruptcy protections will shape which token models scale in the U.S. Examples from industry, such as proposals to shorten settlement windows and pilot tokenized equities, illustrate potential benefits for liquidity and intraday funding, but the SEC reiterated that any operational changes (extended trading hours or faster settlement) would require commensurate surveillance, clearing and access standards. International developments like Europe’s MiCA and stalled U.S. legislative efforts are influencing firms’ strategic choices, increasing pressure on the SEC to provide clear administrative rules in the interim. Practically, the guidance crystallizes near‑term dynamics: projects that can embed securities‑law processes, robust custody arrangements, and cross‑platform recovery mechanics will be best positioned to capture institutional flows; fully decentralized, noncustodial models will face heightened legal and operational headwinds. For regulators and enforcement teams, the statement sets expectations for oversight and compliance without creating a separate regulatory carve‑out for tokens, framing tokenization as innovation that must fit inside—rather than replace—established securities law.