US banking regulators have clarified that tokenized securities will receive the same capital treatment as traditional securities under bank capital rules.
In guidance issued Thursday, the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency said capital requirements remain “technology neutral,” meaning the method used to issue or trade a security does not change how it is treated under banking regulations.
The agencies stated that an eligible tokenized security should be treated in the same way as its traditional form under existing capital rules.
Regulators emphasize technology-neutral rules
According to the guidance, the technology used to issue or transact in a security generally does not affect its regulatory capital treatment.
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This means banks holding tokenized securities on their balance sheets will not be required to apply additional collateral requirements beyond those used for conventional securities.
The regulators also clarified that derivatives referencing tokenized securities should be treated the same as derivatives tied to their non-tokenized equivalents for capital purposes.
Tokenized assets remain eligible as collateral
The agencies stated that tokenized securities can function as financial collateral through their compliance with existing requirements. The requirements include both asset liquidity and the asset’s legal ownership or control by the institution that possesses it.
If those conditions are met, the tokenized security may be recognized as a credit risk mitigant under bank capital rules.
Growing interest from traditional finance
Regulators stated that the clarification exists because traditional financial institutions increasingly pursue asset tokenization.
Major firms including JPMorgan Chase, BlackRock, and Franklin Templeton, have already entered the tokenization market through investments or infrastructure initiatives.
The primary benefit of tokenized assets enables users to conduct trades on blockchain networks throughout all times, instead of being restricted to standard market operating periods.
