The SEC’s Trading and Markets Division clarified that broker-dealers can custody tokenized stocks and bonds under existing customer protection rules, rather than creating a new regulatory category for these blockchain-based securities. Broker-dealers may treat themselves as possessing crypto asset securities if they meet certain operational, security, and governance standards, notably including exclusive control of private keys and ensuring no unauthorized third-party access. Tokenized securities on blockchains may satisfy “physical possession” requirements, but must remain under broker-dealer control, barring self-custody models common in crypto. Broker-dealers are expected to plan for disruptions like blockchain forks and attacks, and comply with lawful order requirements such as asset freezes. The guidance reinforces that tokenized stocks and bonds must be managed within traditional securities frameworks, regardless of their underlying technology. SEC Commissioner Hester Peirce noted ongoing challenges for trading tokenized securities, especially regarding the fit of current exchange and trading system rules. These clarifications come amid expanding interest from institutions like Nasdaq, Securitize, and Coinbase in tokenized securities and onchain trading platforms.

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