The U.S. Securities and Exchange Commission (SEC) is actively exploring the use of Ethereum token standards for regulatory compliant securities. A meeting was held recently between the SEC’s Crypto Task Force and Ethereum-affiliated organizations such as the ERC-3643 Association, Chainlink Labs, the Enterprise Ethereum Alliance, and the Linux Foundation’s Decentralized Trust.
The purpose of the meeting was to examine how open standards like ERC-3643, as well as compliance frameworks such as Chainlink’s Automated Compliance Engine (ACE), can merge blockchain technology with traditional regulatory requirements. The ERC-3643 token standard is designed to be the backbone for compliant capital markets on the Ethereum network and is championed by the ERC-3643 Association and firms such as Chainlink. Meanwhile, Chainlink ACE is a smart-contract-oriented framework for tokenized assets like securities or real-world assets (RWAs).
According to Dennis O’Connell, president of the ERC-3643 Association, the SEC’s approach to the meeting was noticeably different from previous encounters. He said the task force was very receptive and eager to position the U.S. as a leader in the sector.
O’Connell also noted that the SEC displayed a willingness to consider industry-led standards, despite previously overlooking the significance of open standards in blockchain. He said, “We presented our argument on why, like other sectors including traditional finance, standards are crucial for expanding crypto in the U.S. and facilitating the onboarding of securities onto the blockchain.”
The industry representatives pitched proposals on all key aspects of a regulatory framework for tokenized securities during the meeting, including identity, compliance, registry, and control. While the task force did not take a firm position on tokenized securities, they were open to learning how new blockchain technologies can address concerns related to identity, control, and compliance.
The meeting was the culmination of months of preparatory work and signifies a “significant progress for the industry,” according to O’Connell. The ERC-3643 Association and its partners intend to maintain open communication with the SEC Crypto Task Force and other U.S. government agencies, with the aim of catching up with global regulation and eventually leading in blockchain adoption for capital markets.
In a follow-up to the meeting, SEC Chair Paul Atkins made positive comments about tokenization in the U.S. Bloomberg reported that Atkins is considering an innovation exemption within its framework to foster tokenization. He stated, “If it can be tokenized, it will be tokenized,” illustrating the inevitability of asset movement to the blockchain.
