The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have confirmed that tokenized securities will be treated the same as traditional securities for bank capital purposes. In guidance the agencies described their approach as “technology neutral,” saying the method used to issue or transact a security generally should not change its capital treatment.
Under the guidance, an eligible tokenized security should receive the same capital treatment as its non-tokenized counterpart. That means banks won’t be required to over-collateralize tokenized securities merely because they are represented on a blockchain, as they might be for unproven or volatile assets.
Derivatives that reference eligible tokenized securities should also be treated, for capital calculations, the same way derivatives tied to non-tokenized forms are treated. The agencies said tokenized securities can qualify as financial collateral if they are liquid and legally owned or controlled by the institution in a way that allows sale under the terms of a collateral agreement. If an eligible tokenized security meets the definition of financial collateral and all other relevant capital-rule requirements, it may be recognized as a credit risk mitigant.
Interest in asset tokenization has been growing among established financial firms. Institutions including JPMorgan, BlackRock and Franklin Templeton have invested in or built tokenization infrastructure. One of the chief attractions of tokenization is the potential for 24/7 trading and settlement on distributed ledgers, versus the limited trading windows of traditional markets.
The guidance signals a regulatory willingness to incorporate digital representations of traditional securities into existing capital frameworks, provided those instruments meet established legal, liquidity and ownership standards.