SEC’s Heather M. Pierce on Tokenized Stocks: “Still Subject to Federal Securities Laws”

In a decisive statement underscoring the U.S. Securities and Exchange Commission’s (SEC) stance on digital innovation in capital markets, Heather M. Pierce, Senior Special Counsel at the SEC’s Division of Trading and Markets, reaffirmed that digitally issued or tokenized stocks remain subject to existing federal securities laws—regardless of the technology used to issue or transfer them.

Speaking at a recent fintech policy forum in Washington D.C., Pierce addressed a growing trend among startups and some broker-dealers to wrap equity shares into tokenized instruments using blockchain technology. These digitized versions of traditional stocks, often promoted as more efficient and accessible alternatives, are gaining attention as part of the broader tokenization wave sweeping through Wall Street. However, Pierce made it clear that technological innovation does not exempt issuers or trading platforms from legal compliance.

“Whether a security is represented in book-entry form, a digital token, or a physical certificate, the federal securities laws apply equally,” said Pierce. “Innovation is welcome, but not at the expense of investor protections and market integrity.”

Her comments follow an increasing number of public and private market experiments involving digital representations of stocks, bonds, and other traditional financial instruments, particularly through blockchain-based systems. Projects by major institutions like BlackRock, Franklin Templeton, and the New York Stock Exchange have shown strong interest in asset tokenization, a trend some analysts say could transform capital markets over the next decade.

However, Pierce’s warning reflects the SEC’s long-standing concern that many tokenized financial instruments are being marketed in ways that blur the lines of regulatory clarity, often under the mistaken belief that being issued via blockchain removes them from the purview of securities regulations.

The remarks come amid rising scrutiny from lawmakers and industry groups who have been lobbying for a regulatory framework tailored to tokenized assets. Some argue that current laws, drafted in the mid-20th century, are ill-equipped to handle the nuances of blockchain-based issuance and transfer mechanisms. Yet, until Congress enacts new legislation or the SEC adopts specialized rules, tokenized stocks will be treated like any other securities under U.S. law.

“Digital doesn’t mean deregulated,” Pierce emphasized. “Firms engaged in the issuance, custody, trading, or transfer of these instruments must understand and comply with the securities law framework.”

Her statement serves as both a signal to innovators and a warning to non-compliant platforms, particularly those operating in or marketing to U.S. investors. It also reinforces the view that while tokenization can offer improved settlement, efficiency, and fractional ownership, it does not negate the need for licenses, disclosures, and investor protections required under current federal statutes.

As the convergence of traditional finance (TradFi) and decentralized finance (DeFi) continues to unfold, regulatory voices like Heather M. Pierce’s are becoming pivotal in shaping the path forward, one where compliance and innovation must go hand in hand.