SEC’s “Crypto Mom” Warns: Tokenized Securities Still Fall Under Traditional Rules

As the cryptocurrency industry continues pushing the boundaries of traditional finance, a top U.S. securities regulator has issued a strong reminder: tokenized securities are still securities — and must play by the same rules.

Hester Peirce, the Republican commissioner on the Securities and Exchange Commission (SEC), widely known in the crypto community as “Crypto Mom,” issued a statement Wednesday clarifying the SEC’s stance on tokenization, a rising trend in financial technology.

“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset,” Peirce said. “Tokenized securities are still securities.”

What Is Tokenization?

Tokenization refers to the process of converting real-world assets — like company shares — into digital tokens that can be traded on blockchain networks, similar to how cryptocurrencies operate. Investors don’t hold the actual stock certificates or physical assets, but rather tokens that represent ownership.

These tokens can be issued by the company itself or, in some cases, by third-party platforms. While tokenization may promise greater accessibility, liquidity, and faster settlement, it also introduces new regulatory and investor protection concerns.

Why Peirce’s Statement Matters

Peirce’s comments come as many in the crypto and fintech space push for tokenized equity markets — where entire stocks or ETFs are traded as blockchain-based tokens. While the industry sees this as the next evolution in trading, Peirce cautioned that repackaging a stock as a token doesn’t change its regulatory classification.

This is a direct nod to recent moves by crypto firms like Coinbase, which has reportedly approached the SEC seeking approval to launch blockchain-based stock trading.

“Anyone who buys a third-party token could face unique risks,” Peirce warned, highlighting the lack of direct connection between token issuers and the underlying securities.

Innovation vs. Investor Protection

SEC Chairman Paul Atkins, also a Republican, struck a more open tone in a recent CNBC interview, saying the agency should “encourage innovation” when it comes to emerging technologies like tokenization. However, there’s an ongoing tension between fostering fintech growth and maintaining guardrails for investors — particularly retail ones.

Critics argue that tokenization, if left unchecked, could become a backdoor for unregulated securities trading, exposing consumers to fraud, market manipulation, and a lack of legal recourse.

What’s Next for Blockchain-Based Securities?

The SEC has yet to lay out a formal framework for tokenized securities, but Peirce’s comments indicate that existing laws still apply, even if the trading rails look different.

Industry observers are closely watching whether the SEC will:

• Approve pilot programs for blockchain-based equity trading

• Create new guidance for tokenized asset offerings

• Crack down on unauthorized third-party issuers

In the meantime, Peirce’s message is clear: blockchain may change the way we trade, but it doesn’t change the rules of the game.