WASHINGTON—Federal banking regulators have clarified how banks should treat tokenized securities under existing capital rules, signaling that financial institutions can hold certain blockchain-based securities without facing additional capital penalties—so long as the underlying assets are legally identical to traditional securities.
In a joint set of frequently asked questions released Thursday, the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency said that “eligible tokenized securities” should generally receive the same capital treatment as their conventional, non-tokenized counterparts.
Tokenized securities represent ownership rights in traditional financial assets—such as stocks, bonds, or other instruments—using distributed ledger technology. Regulators said the key determining factor is not the technology used to record ownership but whether the tokenized version confers the same legal rights as the traditional security.
Under the agencies’ interpretation, the bank capital framework is “technology neutral.” That means banks should apply the same capital requirements to tokenized securities as they would to the traditional versions of those assets. Derivatives referencing tokenized securities should also receive the same treatment as derivatives referencing the non-tokenized instruments.
The clarification addresses a major question facing banks and financial market infrastructure providers exploring tokenization, a process many view as a potential way to modernize settlement, trading, and custody systems.
The regulators also said tokenized securities may qualify as financial collateral under capital rules if they meet the existing definition used for traditional securities. If so, banks could recognize them as credit-risk mitigants and apply the same regulatory haircuts used for conventional collateral.
Importantly, regulators said the capital treatment does not depend on the type of blockchain used. Securities tokenized on permissioned blockchains—typically used by financial institutions—as well as those on permissionless networks would be treated the same for capital purposes.
While the guidance removes uncertainty around regulatory capital, the agencies emphasized that banks must still apply sound risk-management practices and comply with all applicable laws and supervisory expectations when holding tokenized securities.
The clarification comes as interest grows across the banking industry in using distributed ledger technology to tokenize traditional financial instruments. Proponents argue the technology could streamline settlement processes, reduce reconciliation costs, and allow assets to move more efficiently across financial markets.