SEC Investor Advisory Committee Backs Tokenized Securities, Urges Regulators to Enact Strong Safeguards

The SEC's Investor Advisory Committee voted to recommend that the U.S. Securities and Exchange Commission move forward with a narrow, regulated approach to tokenized securities, urging formal rules that would allow blockchain-based trading of equities while preserving investor protections.

“SEC's advisory group backs tokenized securities push, outlines how to keep it safe The committee that steers the U”

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The committee backed exemptions that would let tokenized equity trading omit traditional intermediaries but insisted these innovations must include mandatory disclosures, routine outside supervision and guarantees that customer orders receive fair terms.

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Committee members, described as veterans from major trading firms, institutional investors and academics, framed the recommendations as a path to modernize settlement while maintaining the securities law framework.

Advocates and SEC leadership highlighted efficiency gains from placing traditional securities on-chain, emphasizing that tokenization can compress settlement into a single atomic transaction that records ownership directly on a blockchain.

Supporters said this could reduce settlement risk, eliminate unnecessary intermediaries, and speed up what in the traditional system can take a day or more to execute.

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SEC Chairman Paul Atkins acknowledged these potential benefits and told the committee the agency is already working toward providing formal direction to the industry to permit regulated tokenization.

Despite the touted benefits, the committee flagged significant risks and insisted on strong safeguards to prevent investor harm and unfair markets.

“SEC's advisory group backs tokenized securities push, outlines how to keep it safe The committee that steers the U”

@coindesk

The recommendation document warned that reforms or exemptive relief could 'introduce new risks that investors do not understand and impose higher costs that outweigh the benefits of tokenization,' stressing the need for mandatory reporting, outside supervision and measures to ensure trade fairness.

The committee’s insistence on those guards reflects concern about operational, disclosure and market-structure dangers inherent to shifting core settlement functions onto distributed ledgers.

Operationalizing tokenized securities will depend on regulators drafting clear rulemaking or narrowly tailored exemptions that balance innovation with investor protection, and the committee’s recommendations aim to provide a blueprint for that work.

The panel’s endorsement gives weight to ongoing agency efforts and signals industry stakeholders want a regulated path that preserves disclosure, supervision and fairness obligations; at the same time, it underscores that any move to permit on-chain equity trading will require close oversight and possibly new compliance mechanisms.

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With the committee's backing, the SEC faces pressure to translate these recommendations into formal action that addresses both efficiency gains and the enumerated risks.