Tokenized stocks face a legal record problem – Is the SEC about to fix it?

The United States Securities and Exchange Commission (SEC) has finally unlocked the question around which database to consider as the legal record for tokenized stocks. For those unaware, tokenized stocks currently have two different ownership records.

One record exists on the blockchain, showing which wallet holds the token. Meanwhile, another record is maintained by a legally recognized transfer agent.

However, now with the new SEC blockchain proposal, it’s a win-win for blockchain technology.

Will the SEC blockchain proposal bridge the long standing gap?

The proposal would allow electronic databases, including blockchain ledgers, to serve as the official record of securities ownership.

Rather than maintaining separate on-chain and off-chain ownership records, the blockchain could become the “master securityholder file”. This would in turn reduce the need for reconciliation and minimize legal and operational risks.

Needless to say, the change would turn out to be apt for events like bankruptcy, when conflicting ownership records can create major disputes.

However, blockchain-based securities would still remain subject to securities laws. Yet this does not mean all off-chain records disappear.