The U.S. Securities and Exchange Commission has proposed a comprehensive modernization of federal transfer agent rules on September 1, 2026, marking a significant shift from the current system that has remained essentially unchanged since paper certificates were the norm. According to Jones Day, the proposal would expand the scope to include market participants actively seeking to bring blockchain-native, on-chain transfer agents into the U.S. market, covering firms with DLT-based recordkeeping, tokenized fund administration, and smart-contract-driven processes. The SEC's technology-neutral approach expressly permits but does not mandate the use of distributed ledgers as the master securityholder file for securities, opening the regulatory door for on-chain recordkeeping without requiring a separate blockchain-specific exemption or framework. The proposal represents the first major overhaul of transfer agent rules since the late 1970s/early 1980s, when the securities industry relied primarily on manual data processing and physical paper certificates.
The SEC's new blockchain proposal addresses a critical legal record problem in tokenized securities by allowing electronic databases, including blockchain ledgers, to serve as the official record of securities ownership. As reported by AMBCrypto, this represents a significant shift from the current dual-record system where tokenized stocks maintain separate ownership records on blockchain and through legally recognized transfer agents. Under the new framework, the blockchain could become the 'master securityholder file', eliminating the need for reconciliation and minimizing legal and operational risks. However, blockchain-based securities would still remain subject to securities laws, with transfer agents still required to maintain essential records such as the control book tracking authorized and outstanding securities and the transfer journal recording issuance, cancellation, and transfer activity. The proposal aims to eliminate the need for a duplicate ownership register while maintaining regulatory compliance.
The SEC is preparing to roll out what would be its largest-ever innovation exemption policy for tokenized securities, with the framework expected to be introduced possibly in early October 2026 after the Clarity Act is advanced. According to The Rollup founder Andy, this exemption would allow tokenized securities to be traded only through registered transfer agents, without requiring broker-dealer licenses or compliance with traditional trading venue rules. The core breakthrough lies in completing the on-chain trading loop at the transfer-agent stage, with transfer agents maintaining legal ownership records on-chain and tokenized funds issuing and trading securities directly as on-chain tokens. Brett Redfearn, President of Securitize, confirmed at a Wyoming blockchain seminar that the exemption is expected to cover both U.S. retail investors and overseas investors, bypassing the multi-layer intermediary structure of traditional broker-dealers and ATS platforms. A large fund has reportedly received an SEC 'green light' for tokenized share issuance, potentially involving major asset managers like Fidelity, ARK Invest, or BlackRock.
Under the proposed framework, transfer agents using DLT or handling tokenized securities would face expanded recordkeeping obligations including capturing digital wallet addresses in position-detail records and producing records in human-readable electronic formats for SEC examiners. As reported by Jones Day, new Form TA-2 reporting requirements would create the first comprehensive regulatory dataset on distributed ledger usage and tokenized securities activity by registered transfer agents, including breakdowns by tokenization model and security type. This dataset would provide both the SEC and industry visibility into how blockchain infrastructure is being adopted, with transfer agents required to report the number of securities issues maintained using DLT, tokenization provider names and platforms used, and the number of serviced tokenized issues broken out by tokenization model and security type. The proposal is expected to lead to significant simplification of post-trade systems design and reduce costs to manage them considerably.
The proposed amendments would introduce Proposed Rule 17ad-30 requiring written policies and procedures for federal securities laws compliance and Proposed Rule 17ad-31 governing restrictive legends and preventing unregistered transactions unless transfer agents have reasonable basis to believe they don't violate Section 5(a) of the Securities Act. According to Jones Day, the proposed amendments to Rule 17ad-12 would reframe safeguarding as comprehensive risk management, obligating transfer agents to maintain written policies protecting securities against material risks including cybersecurity and operational risks inherent to blockchain-based systems and smart contracts. Transfer agents would also need a business continuity plan and 'for the benefit of' bank account for issuer, securityholder, and third-party funds, separate from the agent's operating accounts. Commissioner Hester Peirce has made it clear that "tokenized securities are still securities," meaning trades involving tokenized securities fall under federal securities laws, with the exemption targeting only broker-dealer and ATS registration requirements, not the applicability of securities laws themselves.
The SEC has opened a 60-day public comment period ending in early November, with the proposal remaining a proposal and not automatically approving every blockchain network or token structure for official recordkeeping. As reported by Jones Day, the proposal arrives as tokenized securities projects move from pilot projects toward wider adoption in the market. The planned rollout timeline has undergone significant changes, with the SEC originally intending to publish the exemption on August 14, 2026, but delaying due to political considerations around the Clarity Act. Senate Majority Whip John Thune has scheduled a floor debate and vote on ending debate regarding the Clarity Act for September 15, which could impact the exemption's release timing. The Clarity Act floor debate and vote on ending debate is scheduled for September 15, which could impact the exemption's release timing. Institutional projects are already building regulated services around similar controls, with Cosmos forming a 17-company partner network covering custody, compliance, security, and infrastructure for banks using its tokenization system.
