SEC Tackles Token Ownership Gaps with New Blockchain Rules

The Securities and Exchange Commission (SEC) has proposed new rules to address the ownership gap in tokenized stocks, which can change wallets within seconds. The proposal asks how blockchain records and off-chain information should connect to determine ownership.

Tokenization creates a blockchain record that must be synchronized with the issuer's master securityholder file when the token represents the share itself. However, if the process stops after recording the wallet address, the recipient may control the token without holding the same legal position as a shareholder recognized by the issuer.

The SEC's proposed rules require transfer agents to disclose their blockchain systems and report the number of issues for which blockchain technology maintains all or part of the master securityholder file. This would help regulators locate responsibility when several companies participate in issuance, custody, recordkeeping, and token transfers.