SEC warns that token encryption is not a substitute?

A conciliatory move from the SEC

The U.S. Securities and Exchange Commission (SEC) has issued one of its clearest and strongest statements ever regarding the growing trend of asset tokenization, explicitly warning that moving traditional securities onto the blockchain does not exempt them from federal securities law.

In a speech by SEC Commissioner Caroline A. Crenshaw at a fintech conference on January 28, 2026, and reinforced by a concurrent statement from staff from the Corporate Finance Division, the agency emphasized:

“ Asset tokenization is a technological innovation, not a legal one. The issuance of tokenized stocks, bonds, fund shares, or any other financial instrument does not automatically remove it from the definition of a ‘securities’ under the Securities Act of 1933 and the Securities Exchange Act of 1934. If it meets the Howey test—or is a security—then it must be registered or qualify for an exemption. ”

These remarks come amid the explosive growth of tokenized real assets (RWAs), with platforms like Ondo Finance (over 200 US stocks and ETFs tokenized on Solana ), BlackRock's BUIDL fund , Franklin Templeton 's on-chain products , and even recent bank-led issuances ( Emirates NBD's $272 million digital bond ) pushing the sector toward a potential market size of trillions of dollars.

Tokenization is not law.

The core of the SEC's position is a simple principle: tokenizing assets is a technological choice, not a legal transformation. Whether an asset is represented by a paper certificate, an entry in a centralized database, or a blockchain token, the fundamental rights—ownership, cash flow, governance—remain the determining factors.

From a regulatory perspective, a coded stock is still a stock, a coded bond is still a bond, and a coded equity investment is still an equity investment. Therefore, they are still subject to registration, disclosure, custody, and investor protection requirements.

For companies operating in the cryptocurrency sector, this warning raises the bar. Companies offering tokenized securities must operate within the existing securities framework, including securities brokerage registration, exchange or ATS licensing, transfer agent rules, and compliance with anti-money laundering and investor protection standards.

This narrows the path for “ permissionless ” crypto finance when it comes to securities—but doesn’t close it completely. Instead, it spurs innovation toward regulated, institutional-friendly models.

Assessment and Conclusion

This warning also impacts market structure. Platforms hoping to bypass exchanges, clearinghouses, or custodians through asset tokenization may find those ambitions curtailed. At the same time, regulated venues experimenting with on-chain payments will have an advantage, as they can integrate blockchain technology without violating core legal principles.

If an instrument is a security under U.S. law, tokenizing it on Ethereum, Solana, or any other chain doesn't change that fundamental fact. This perspective might slow down some speculative or offshore RWA projects, but ultimately it strengthens the argument for tokenizing regulated assets – a path BlackRock, Franklin Templeton, VanEck, and others have chosen. For the long-term growth of tokenized assets, clear rules are better than regulatory ambiguity.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrency. This is not financial or investment advice. All investment decisions should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official stance of the platform. We recommend that readers conduct their own research and consult with experts before making any investment decisions.

Compiled and analyzed by HCCVenture

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