Regulation of Tokenized Securities Markets (SIFMA and SIFMA AMG)

Summary

SIFMA and SIFMA AMG provided additional comments to the SEC Crypto Task Force in response to the statement by Commissioner Hester M. Peirce entitled “There Must Be Some Way Out of Here,” requesting information from stakeholders on activity involving blockchain-based digital assets, and the SEC’s ongoing work to develop regulatory frameworks to accommodate digital assets in the securities markets.

Excerpt

Executive Summary
SIFMA and its members support innovations that improve the functioning, resiliency, and efficiency of U.S. capital markets, and we recognize the substantial potential benefits associated with tokenization—particularly regarding operational efficiency, settlement modernization, transparency, and collateral mobility. These benefits, however, must not come at the expense of the foundational safeguards that protect investors, promote fair, functioning and orderly markets, and ensure systemic stability. As we have stated previously, tokenized securities—whether natively issued or wrapped—must remain subject to the same core regulatory principles that govern conventional securities.

To aid the Commission and the Task Force in their continued work, this letter provides a detailed framework for how digital asset securities should fit within existing regulatory structures. Our recommendations build on prior SIFMA submissions and incorporate lessons from recent market events, including the October 2025 crypto flash crash and the November 2025 Stream Finance collapse, both of which underscore the risks that can arise in the absence of the core market integrity and investor protection measures that underpin the strength of the U.S. securities markets.

I. Lessons from Recent Crypto Market Events for the Regulation of Tokenized Securities Markets

• Recent market disruptions in the native crypto markets such as the October crypto “flash crash” and the collapse of Stream Finance highlight the importance of the established regulatory frameworks that preserve market quality and ensure investor protection in the
  U.S. securities markets.
• The October 2025 crypto “flash crash” illustrated the importance of established market stress management mechanisms that exist in the securities markets.
• The November collapse of Stream Finance highlighted a range of questions on the stability of decentralized finance (“DeFi”) models, including the opacity of exposures and interrelationships among market participants and the possibilities of market contagion.
• These events also demonstrate that experiences learned through sandboxes or constrained
  innovation programs may not provide a robust understanding of how new operating models
  would perform under stressed conditions.
• We encourage the SEC to work with the industry on a range of innovative projects which apply distributed ledger-based technologies while still preserving the core protections of the securities markets, such as the recent no-action letter issued by the Commission on the DTC tokenization program. This can be supported by clarification of how registered entities, in the absence of full regulatory guidance, can reasonably and in good faith act to apply existing principles and rules to new activities.