SEC Backs New Rules for Digital Security Trading

The SEC’s Crypto Task Force met with Ethereum organizations, to examine the ERC-3643 token standard for tokenized securities. Representatives from the ERC-3643 Association, Chainlink Labs, Enterprise Ethereum Alliance, and Linux Foundation Decentralized Trust attended the session.

The meeting focused on how ERC-3643 and Chainlink’s Automated Compliance Engine can integrate identity verification, control systems, and registry functions for onchain assets while meeting regulatory requirements. ERC-3643 serves as a token standard designed for compliant capital markets on Ethereum, backed by the ERC-3643 Association and companies including Chainlink.

Dennis O’Connell, president of the ERC-3643 Association, reported that the SEC demonstrated “a noticeable shift in tone” and showed greater openness to industry-led blockchain standards compared to previous years. 

Industry participants presented proposals covering identity verification, compliance automation, registry services, and control mechanisms to ensure tokenized securities follow existing securities laws and investor protections.

After the meeting, SEC Chair Paul Atkins indicated the commission is considering an innovation exemption to promote tokenization. This could include exceptions to enable new trading methods for tokenized securities. 

If it can be tokenized, it will be tokenized,

Atkins stated.

The SEC maintains that tokenized securities must comply with the same registration, disclosure, and custody rules as traditional securities under the Securities Act of 1933 and Securities Exchange Act of 1934. Commissioner Hester Peirce stated that tokenized securities are still securities and emphasized that wrapping a security in a digital token does not alter its legal classification or regulatory requirements.

Several countries have already adjusted their laws for asset tokenization. France opened tokenization of unlisted company shares in 2017. Liechtenstein adopted a comprehensive legal framework treating tokens as containers of rights. The EU implemented the DLT Pilot Regime and MiCA as separate but complementary frameworks.

O’Connell described the session as significant for the industry and said the ERC-3643 Association will continue working with the Crypto Task Force and other U.S. agencies to advance blockchain adoption in capital markets.