Crypto industry executives told the US House Financial Services Committee on Wednesday that existing investor protections and financial surveillance rules should apply to tokenized securities.
The hearing came as lawmakers consider the Capital Markets Technology Modernization Act of 2026 and assess how asset tokenization will affect capital markets and the “need to balance innovation with investor protection and market integrity,” panel chairman Representative French Hill said in a statement.
Tokenized real-world assets (RWA)—traditional financial instruments represented by tokens on blockchains—can lower transaction costs and speed settlement, Summer Mersinger, CEO of the Blockchain Association, told the committee. “By replacing flawed manual record-keeping processes with more transparent timestamps and stamped records, tokenization lowers the cost and re-imagines US financial markets,” she said.
Mersinger and other witnesses agreed that existing securities laws apply to tokenized instruments, arguing that the technology and recording medium do not change investor protection rules or regulatory jurisdiction. Supporters say tokenization can remove intermediaries from settlement and clearing, cutting costs and enabling near-instant settlement to boost capital velocity.
Lawmakers pressed the panel on how issuers and platforms would meet know-your-customer (KYC), anti-money laundering (AML) and sanctions obligations. Representative Bill Foster asked whether tokenized assets would be on private, permissioned blockchains or various public blockchains that allow anonymous participation via self-custodied wallets.
John Zecca, Nasdaq’s executive vice president and global chief legal, risk and regulatory officer, said Nasdaq can collect KYC data at the protocol level because its system operates on a permissioned blockchain. Christian Sabella, managing director and deputy general counsel at the Depository Trust & Clearing Corporation (DTCC), said identifying information can also be embedded at the token level, making those identifiers immutable regardless of trading on permissioned or permissionless networks.
Salman Banaei, general counsel for Plume Network, a permissionless RWA-focused blockchain, said his network embeds AML and sanctions checks at the token level and can freeze tokens. Still, Banaei told Foster that regulators currently lack technological tools to identify wash trades or market participants with complete confidence.
The hearing highlighted industry claims about efficiency gains from tokenization alongside ongoing concerns about surveillance, compliance and the limits of current regulatory technology. Lawmakers and witnesses alike emphasized applying existing investor protection frameworks while assessing the practical enforcement and monitoring challenges that tokenized markets present.
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