SEC Proposes Overhaul of Transfer Agent Rules Amid Growing Blockchain Adoption

The US Securities and Exchange Commission (SEC) has proposed a major overhaul of its transfer agent rules, which have remained largely unchanged since the late 1970s. The move is aimed at addressing the growing use of blockchain-based recordkeeping and tokenized securities in US markets.

The SEC's existing framework does not adequately address the risks associated with these developments, particularly cybersecurity, operational resilience, and the safeguarding of securities and investor records. Market participants are actively seeking to bring blockchain-native transfer agents into the US market, pointing to models for blockchain-based recordkeeping, tokenized fund administration, and cross-chain interoperability.

The proposed changes would update requirements covering registration, recordkeeping, safeguarding, and securities transfers, as well as introduce new rules aimed at emerging risks. Transfer agents would face expanded reporting requirements and new compliance standards, including rules governing restrictive legends on securities and the use of third-party service providers.