SEC Announces Update to Transfer-Agent Rule in Bid to Accommodate Tokenized Assets
On Tuesday, the US Securities and Exchange Commission (SEC) introduced its plan to “modernize” the foundations and varieties governing registered switch brokers.
The core framework for federal switch agent regulation was established by the SEC through the late Seventies and early Nineteen Eighties. The modernization would subsequently facilitate new tech, together with “blockchain expertise in reference to securities choices and the switch of shares,” according to SEC Chair Paul Atkins.
Industry specialists have referred to as it “vital,” particularly for real-world asset (RWA) tokenized securities and the broader migration of conventional finance onto the blockchain.
“The SEC is just not immediately altering how crypto-native secondary markets function. Instead, the proposal explicitly updates the transfer-agent framework to mirror the usage of digital information and blockchain expertise in securities issuance and share transfers. That provides regulated monetary establishments a clearer path to utilizing on-chain information throughout the current securities infrastructure,” Bitunix analyst Dean Chen instructed DeFi Rate.
A time for change in century-old regulation
On the identical day because the switch agent announcement, the SEC additionally confirmed its agenda and panelists for a roundtable on preparations for 24-hour buying and selling, scheduled for Sept. 17. An initiative that may deliver the New York Stock Exchange, Nasdaq, Citadel Securities, Cboe, Samsung, and newer entrants like Robinhood to the desk to talk about round the clock markets, together with in a single day surveillance and clearing mechanics for a steady system.
In addition, the SEC also proposed Regulation Crypto Assets, also referred to as the Proposal, in mid-August, which establishes a tailor-made fundraising framework that includes two registration exemptions for sure crypto funding contracts. Prior to this, crypto issuers that raised capital by promoting non-security crypto belongings topic to an funding contract have had to adjust to current SEC guidelines, which weren’t designed with these belongings in thoughts and plenty of of which originated in the Nineteen Thirties.
According to Joshua Kim, the CEO and founding father of decentralized crowdfunding platform DonaFi, the SEC’s proposed Regulation Crypto Assets is a “fairly vital shift”.
“Crypto markets have spent years coping with uncertainty over the place securities guidelines start and finish, so clearer guidelines ought to encourage reliable initiatives to construct and lift cash domestically.”
Legitimizing blockchain as market infrastructure
In addition to regulatory shifts, 21 main banks, together with Goldman Sachs, Bank of America, Citi, Wells Fargo and extra, announced they teamed up to launch a dollar-pegged stablecoin of their very own.
In a written assertion shared with DeFi Rate, Bernardo Brites, CEO and co-founder of Trace Finance, a banking and stablecoin infrastructure firm that has processed over $10 billion between Brazil, LatAm, and the worldwide monetary system, stated that the business is transferring away from stablecoins being “a crypto-native experiment and shifting towards core funds infrastructure that conventional finance desires to personal a bit of.”
Brites added, nonetheless, that issues might come up as soon as bank-issued stablecoins, tokenized deposits, and current greenback tokens all have to settle towards one another. A problem that “solely works if the rails connecting them are literally interoperable, not simply quick in isolation.”
That interoperability query is just not removed from what the SEC’s transfer-agent proposal goals to remedy on the securities aspect. A standard customary so information held throughout totally different platforms and establishments can really reconcile with one another.
Michael Terpin, CEO of Transform Ventures and creator of Bitcoin Supercycle, sees the regulatory and institutional tracks converging.
“It’s encouraging that the SEC is together with blockchain infrastructure (not simply digital belongings) in its contemporary new have a look at regulatory steerage. Traditional monetary establishments — and their purchasers — will profit enormously from the extra environment friendly, clear infrastructure,” Terpin stated.
The hole between the rule and the rally
According to Chen, the SEC’s bid to modernize switch agent guidelines can be a lift for regulated infrastructure, however that doesn’t imply it is going to immediately affect public-chain tokens reminiscent of ETH (Ethereum) and SOL (Solana).
Chen pointed to three particular gaps between the rule as written and any significant spillover into permissionless crypto markets.
First, conventional establishments are probably to favor permissioned blockchains, managed Layer 2s or appchains initially, that means the worth created might keep contained inside closed institutional networks fairly than reaching public chains.
Second, switch brokers remedy recordkeeping and switch, not liquidity. This means RWA liquidity will nonetheless rely upon secondary-market infrastructure reminiscent of various buying and selling methods (ATS), exchanges, and clearing methods, which this proposal doesn’t handle.
Third, tokenized securities will stay topic to know your buyer (KYC), anti-money laundering (AML), whitelisting, and switch restrictions, thereby sustaining a tough wall between regulated tokenization and permissionless decentralized finance (DeFi).
“Over the subsequent three to 5 years, the extra necessary improvement can be whether or not this creates a brand new mannequin of ‘compliant decentralization’ that mixes on-chain transparency, id verification and regulatory controls, finally permitting institutional capital and permissionless monetary infrastructure to join extra immediately,” he stated.
What’s subsequent?
The proposal’s affect will probably hinge on particulars nonetheless being labored out contained in the 400-plus-page submitting.
According to a statement published by SEC Commissioner Hester Peirce, one of many extra consequential questions is whether or not switch brokers ought to hold amassing securityholders’ names and bodily addresses, or whether or not the rule ought to permit different identifiers, reminiscent of e mail and digital pockets addresses, as a substitute.
The proposal is open for public remark for 60 days following its publication in the Federal Register, giving switch brokers, exchanges, custodians and crypto platforms a window to form the ultimate language earlier than it’s adopted.
Securitize, the primary operational switch agent to leverage blockchain expertise, said in a statement that “modernization ought to elevate requirements, not decrease them,” calling the SEC’s bid a “proper transfer”.
The firm vowed to submit feedback through the public remark interval.
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