SEC Targets Blockchain Era With Transfer Agent Rule Overhaul As Wall Street Ramps Up Tokenization

The SEC proposed updating decades-old transfer agent rules to reflect electronic communications and blockchain-based securities systems.

• SEC Chair Paul Atkins said the changes would better match how transfer agents operate today, including the use of blockchain technology.
• The proposal could give tokenized securities a clearer framework for recording ownership and transferring shares on distributed ledgers.
• Tokenization is accelerating on Wall Street and across the financial industry as a whole. 

The U.S. Securities and Exchange Commission (SEC) on Tuesday proposed a sweeping change to rules covering registered transfer agents, the companies that keep track of who owns securities and move securities between investors, in an effort to update the rules.

Transfer agents are regulated financial intermediaries that maintain shareholder records, facilitate the transfer of securities, and manage certain corporate actions.

The proposed changes, the SEC said, would modernize a regulatory framework that has not changed much in decades and could make the rules better suited for modern securities markets and emerging technologies.

SEC Chairman Paul Atkins said, “This proposal would streamline and modernize the Commission’s rules to reflect transfer agents’ current processes and operations, including the use of electronic communications and blockchain technology in connection with securities offerings and the transfer of shares.”

The proposal also has implications for the booming market in tokenized securities and blockchain-based financial infrastructure, as companies increasingly explore distributed ledger technology to record and transfer ownership.

Why It Matters

The proposal is a big deal because it aims to update rules written mostly for a paper-and-early-electronic age to reflect today’s digital financial markets, including the increasing use of electronic recordkeeping and blockchain technology. The proposal could also impact tokenized securities, potentially helping to create a clearer regulatory framework for recording and transferring ownership on distributed ledger systems. 

Wall Street’s Tokenization Boom

Tokenization is accelerating on Wall Street and across the financial industry as a whole. Exchanges, asset managers, and crypto platforms are increasingly looking into blockchain-based versions of stocks, funds, and other traditional assets. The New York Stock Exchange and Securitize (SECZ) are working together on a platform for tokenized securities.

On Monday, tZERO and Intercontinental Exchange (ICE) agreed to work together on infrastructure for tokenized securities. tZERO will help build the digital transfer agent and broker-dealer systems for ICE's planned tokenized securities platform that is linked to the New York Stock Exchange (NYSE). 

It could also help set standards for digital transfer agents as more public stocks move to blockchain-based infrastructure, the company said.

ICE’s stock was down over 1% in midday trade. On Stocktwits, retail sentiment around ICE remained in the ‘bearish’ zone, accompanied by ‘high’ chatter levels over the past day.

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