SEC’s ‘Crypto Mom’ affirms tokenized securities remain subject to regulations

Hester Peirce, a Republican commissioner of the U.S. Securities and Exchange Commission (SEC) known as “crypto mom” for her supportive views on cryptocurrencies, emphasized on Wednesday that tokenized securities must comply with existing securities regulations.

Peirce stated, “As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities.” Tokenization refers to converting traditional shares into digital tokens traded on blockchain platforms. Investors holding these tokens own a representation of the underlying securities.

She warned that tokens issued by third parties, rather than the original security issuers, carry distinct risks for investors.

The concept of tokenized securities is gaining traction in the crypto and finance industries as a potential way to innovate trading processes. Coinbase recently revealed it is seeking SEC approval to offer blockchain-based stock trading.

SEC Chairman Paul Atkins, also a Republican, voiced support for fostering innovation but stressed regulatory oversight remains important. Critics argue that tokenization could be exploited to bypass SEC rules, putting retail investors at risk.