The U.S. Securities and Exchange Commission has proposed amendments to transfer-agent rules, seeking to align securities regulations with advancements in blockchain technology and tokenization. The move, announced on 1 September, aims to modernize frameworks that have remained largely unchanged since the late 1970s, while addressing risks linked to fragmented digital record-keeping.
The proposal comes amid growing use of blockchain in financial markets, with regulators acknowledging both the efficiency gains and the challenges of reconciling distributed ledger systems with existing legal requirements. SEC Chair Paul Atkins emphasised the need for rules to reflect “how transfer agents actually work today or will work tomorrow,” including their use of blockchain for securities offerings and share transfers.
The update draws parallels to the Paperwork Crisis of the late 1960s, which highlighted the vulnerabilities of manual, paper-based systems. That crisis spurred the creation of the Depository Trust Company in 1973, a centralized digital recordkeeping system that remains a cornerstone of modern markets. Fairmint, which registered as a transfer agent in 2023, has advocated for onchain cap tables to serve as the official record of ownership.
Commissioner Hester Peirce raised practical concerns about data collection in onchain securities, noting that “moving securities onchain raises questions about data collection.” The SEC is also grappling with unresolved issues, including the definition of “control” over distributed ledgers and whether a token in a wallet meets legal requirements for an official ledger.
The proposal marks a pivotal moment for blockchain integration into traditional financial infrastructure, though challenges remain in standardizing ownership data and ensuring compliance with existing frameworks.
Written by Steven Cook
Regulation Desk
