Fed clarifies rules for tokenized securities in bank capital

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Fed clarifies tokenized securities rules

Highlights

Fed clarifies capital treatment of tokenized securities.
Tokenized assets receive the same treatment as traditional securities.
Guidance comes as banks expand blockchain asset experiments.

The guidance was prepared jointly by the Federal Reserve Board, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC). In a press release, regulators provided answers to questions raised by banks when dealing with assets issued or represented on distributed ledger systems.

Technology does not change capital requirements

The document states that the method used to issue or transact a security does not affect its regulatory treatment. If an asset represented on a distributed ledger provides the same legal rights as a traditional security, the capital requirements remain the same.

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As stated in the guidance: “The capital rule is technology neutral, and the technologies used to issue and transact in a security do not generally impact its capital treatment.”

In other words, tokenized stocks, bonds, or other instruments that meet established criteria should be treated by banks in the same way as their traditional forms. The same principle applies to derivatives referencing such assets.

Regulators also clarified how tokenized securities may be used as financial collateral. If an asset meets the requirements of capital adequacy rules, a bank may recognize it as collateral to mitigate credit risk. In such cases, the same haircuts and conditions apply as those used for traditional securities.

Regulators also emphasized that banks holding such assets must comply with existing regulations and apply appropriate risk management practices.

Why tokenization Is becoming important for financial markets

Interest in asset tokenization has grown as major banks and investment firms have begun testing the issuance of bonds, funds, and other instruments on blockchain platforms.

In tokenization, ownership rights to financial instruments are recorded on distributed ledgers. This format can potentially simplify settlement processes between market participants, accelerate transactions, and reduce infrastructure costs.

Large financial institutions are already experimenting with such solutions. For example, JPMorgan is developing its Onyx blockchain platform for settlements and asset tokenization, while French bank Société Générale has previously issued bonds on the Ethereum blockchain. In 2024, BlackRock also began actively exploring the use of tokenization for investment products.

According to Boston Consulting Group, the value of tokenized assets could reach about $16 trillion by the end of the decade. For banks and financial institutions, regulatory clarity remains a key factor. In essence, regulators have sent a signal to the market: the use of blockchain itself does not change banking supervision requirements. If a tokenized asset carries the same legal characteristics as a traditional security, it should be regulated under the same rules.

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