That uncertainty is particularly relevant as financial institutions and public companies explore tokenization.
Tokenized securities move into focus
For IR professionals, one of the most important implications of the CLARITY Act could be how it supports the development of tokenized securities.
Tokenization involves representing a traditional financial security as a digital asset recorded, in whole or in part, on a blockchain or other crypto network. The SEC has already established that putting a security on a blockchain does not change its status as a security under federal law.
The Commission’s January statement on tokenized securities identified different models for tokenization, including securities where the issuer maintains ownership records through distributed ledger technology and third-party arrangements where a token represents an underlying security.
If tokenized equities and other securities become more widely adopted, companies will need to consider how traditional shareholder rights operate in an on-chain environment. Ownership records, shareholder communications, voting, dividends and other corporate actions could increasingly interact with blockchain-based systems.
The issue is already moving beyond theory. A July analysis from White & Case highlighted how infrastructure providers including Broadridge Financial Solutions and Computershare have been extending existing proxy infrastructure to support corporate governance for tokenized securities.
For IR and governance teams, this raises questions around how shareholder voting is authenticated, how beneficial ownership is established and how tokenized holders receive and exercise their rights.
The underlying governance obligations do not disappear because a security is represented digitally. Instead, companies and their advisers will need to ensure that existing requirements around ownership, disclosure and shareholder rights can function effectively alongside new forms of market infrastructure.
The Commission’s Division of Trading and Markets has been directed to develop a framework for listing and trading tokenized securities, with the aim of allowing innovation without creating regulatory arbitrage.
SEC support and criticism
SEC chair Paul Atkins has backed the CLARITY Act and said the Commission’s own regulatory framework for crypto assets draws heavily on the work being undertaken by Congress, specifically the CLARITY Act. He has described the legislation as part of efforts to establish a durable framework for digital asset markets.
The SEC has already moved to provide greater clarity through its own interpretation of federal securities laws. In March, the commission outlined a taxonomy covering digital commodities, digital collectibles, digital tools, stablecoins and digital securities while addressing how securities laws apply to activities including staking, airdrops and the wrapping of non-security crypto assets.
However, the commission’s approach and its support for the CLARITY Act have attracted criticism from industry experts and former regulators.
Former SEC internet enforcement chief John Reed Stark has been particularly critical, arguing that the legislation could weaken the agency’s ability to oversee the digital asset market. Critics have also questioned whether shifting significant responsibility to the CFTC would provide sufficient resources and enforcement capacity to protect investors.
Other opponents, such as former CFTC chairman Timothy Mossad, have raised concerns over anti-money laundering requirements, investor protection and exemptions that they argue could leave parts of the digital asset ecosystem outside effective regulatory oversight.
If the CLARITY Act passes, the consequences could extend well beyond crypto exchanges and digital asset companies.
For now, companies will have to wait. The Senate’s September return will determine whether the legislation can overcome its remaining political obstacles. But with supporters continuing to predict passage, IR professionals may want to start considering what a more heavily tokenized US capital market could mean for the way companies engage with their shareholders.
