U.S. Federal Reserve, OCC Approves Banks to Handle Tokenized Securities

Multiple U.S. regulators have clarified rules for the handling of capital of tokenized securities in the banking system. This suggests banks are now being allowed to handle these assets amid the growing adoption.

Banks Get Clearer Capital Rules for Tokenized Securities

Regulators in the US banking sector made a clarification on Thursday that banks should not be expected to hold additional capital in the event of losses while working with blockchain-based securities, as their regulations are “technology neutral.”

The US Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued the guidance in the form of regulations. This clarified that the regulators would not make any distinction between tokenized securities and traditional securities.

The agencies issued this document because they noticed that banks were interested in representing ownership rights through tokenized assets.

This comes after the SEC released new guidelines for the tokenization of securities. The SEC has made it clear that this type of asset is under the same laws as other securities.

Banks and other financial institutions are obliged by their regulators to hold capital in a buffer against financial stress. This allows them to set aside a certain amount of liquid assets to secure themselves and their customers. Imposing the same condition for both types of ownership of the securities will not put the crypto-related assets in a more stringent position.

The same condition will apply to the tokens issued in permissioned or permissionless systems, the regulators said. This technology-neutral condition will apply to the capital related to derivatives that are based on tokenized securities as well.

Crypto expert Ash Crypto highlighted how this new clarification essentially means banks have now been officially approved to hold these assets.

Tokenized Equities Hit $1.1B in Value

Tokenized public equities have reached an estimated value of $1.1 billion, according to RWA.xyz. Its data also showed that the tokenized RWA is valued at around $26 billion.

Only a handful of firms have issued their own experimental stock tokens on the blockchain, but the majority of the tokenized securities have been issued by third parties based on the shares of other publicly traded firms. Other firms, such as Franklin Templeton and BlackRock, have also tokenized treasury products.

The crypto space last year also seized the opportunity to take advantage of the surge in interest in the space. Companies such as Robinhood, Kraken, and Gemini started tokenizing their shares in the European market.