SEC: Tokenized securities are still subject to federal securities regulations, calling on market participants to comply with compliance requirements.

On July 10, the SEC issued a statement regarding the tokenization of securities, stating that blockchain technology has opened up new models for the issuance and trading of securities in the form of "tokenization." Tokenization has the potential to facilitate capital formation and enhance investors' ability to use their assets as collateral. However, despite the significant potential of blockchain technology, it does not possess the "magic" to change the nature of the underlying assets. Tokenized securities are still securities. Therefore, market participants must carefully consider and comply with the relevant provisions of federal securities laws when trading such instruments.

Sometimes, the issuer will tokenize its own securities. Investors purchasing such third-party tokens may face certain unique risks, such as counterparty risk. The issuer of tokenized securities must also consider the information disclosure obligations under federal securities laws and may refer to the recent staff statements issued by the SEC's Division of Corporation Finance.

At the same time, market participants who issue, purchase, and trade tokenized securities should also consider the attributes of these securities and the compliance issues raised by securities law. Although blockchain-based tokenization is an emerging technology, the act of "issuing financial instruments that represent securities rights" is not new in itself. Whether these instruments are issued on-chain or off-chain, the applicable legal requirements remain the same. Therefore, market participants should consider communicating with the U.S. Securities and Exchange Commission (SEC) and its staff when designing their tokenization product schemes, and we are willing to work with market participants to develop reasonable exemption mechanisms and promote the modernization of rules.