The US Securities and Exchange Commission (SEC) recently held a meeting with industry players to discuss the implementation of a token standard that would support the compliant issuance and transfer of tokenized securities. The SEC’s Crypto Task Force engaged with Ethereum-aligned organizations such as the ERC-3643 Association, Chainlink Labs, the Enterprise Ethereum Alliance, and the Linux Foundation (LF) Decentralized Trust.
During the meeting, the participants explored how open standards like ERC-3643 and compliance frameworks like Chainlink’s Automated Compliance Engine (ACE) could facilitate the integration of onchain technology with traditional regulatory requirements. ERC-3643 is a token standard designed to serve as the foundation for compliant capital markets on the Ethereum network, with backing from the ERC-3643 Association and support from companies like Chainlink. Meanwhile, Chainlink ACE offers a smart-contract-based framework for tokenized assets, including securities and real-world assets (RWAs).
Dennis O’Connell, president of the ERC-3643 Association, noted a significant shift in the SEC’s tone and approach during the meeting, indicating a newfound openness to industry-led standards for blockchain compliance. O’Connell highlighted the SEC’s willingness to consider the importance of open standards in blockchain, which had not been previously explored. Industry representatives presented proposals encompassing key elements of a regulatory framework for tokenized securities, covering aspects such as identity, compliance, registry, and control.
The meeting culminated in a positive outcome, with the SEC showing receptiveness to new technologies in blockchain that address concerns surrounding identity, control, and compliance. O’Connell emphasized the collaborative efforts between the ERC-3643 Association and its partners to engage with the SEC Crypto Task Force and other US government agencies, aiming to align US regulation with global standards and drive blockchain adoption for capital markets.
Following the meeting, SEC Chair Paul Atkins expressed support for tokenization in the US, signaling potential changes to promote tokenized securities development. Atkins mentioned the consideration of an innovation exemption within the SEC framework to facilitate tokenization and enable new trading methods. Recognizing the inevitability of asset migration to the blockchain, Atkins emphasized the growing trend towards tokenization.
Overall, the meeting marked a significant step forward for the industry, with the SEC showing a willingness to embrace industry standards and support the advancement of tokenized securities in the US. As the regulatory landscape evolves, stakeholders are optimistic about the potential for increased tokenization and blockchain adoption in capital markets.