SEC Proposes Blockchain Transfer Rules as It Prepares for 24-Hour Trading

Key Takeaways

• The SEC has proposed modernizing transfer-agent rules to account for electronic records, blockchain technology, and changes in securities markets.
• The regulator will hold a September 17 roundtable on 24-hour trading, with participants including Citadel Securities, DTCC, NYSE, Nasdaq, and Robinhood.
• The proposed changes could help establish a clearer regulatory framework for tokenized stocks and other securities recorded or transferred onchain.

The U.S. Securities and Exchange Commission (SEC) is taking two steps that could bring traditional markets closer to blockchain technology.

The SEC made two separate announcements. On September 1, the regulator proposed a rule redefining transfer agents to recognize the growing use of blockchain technology. In a separate announcement, the agency announced details for a September 17 roundtable focused on preparations for 24-hour trading.

SEC Proposes Transfer-Agent Updates for Blockchain Technology

Earlier on Tuesday, the SEC proposed a broad update to its transfer-agent rules to reflect the role of blockchain technology and other innovations.

Transfer agents are firms that track ownership records for securities and help process their issuance, cancellation, and transfer.

According to the SEC, its core transfer-agent rules date largely from the late 1970s and early 1980s and have not been substantively updated since.

The proposed rule would reflect electronic recordkeeping and newer technologies, including blockchain.

SEC Chairman Paul Atkins said the changes would modernize the framework, "including the use of electronic communications and blockchain technology in connection with securities offerings and the transfer of shares.”

The proposal would update the regulatory framework to better account for transfer agents already using technologies such as blockchain and electronic recordkeeping. It also proposes new checks on a firm’s operations, including in areas such as cybersecurity.

In a Tuesday statement, SEC Commissioner Hester Peirce said, “A lengthy delay in updating the Commission’s transfer agent rules would be bad for the markets, investors, and issuers.”

She also highlighted a question that would be central to the crypto sector’s interest in the rule: “Should transfer agents continue to be required to collect names and physical addresses of securityholders, or should the rule allow other identifiers, such as email and digital wallet addresses, to be collected instead?”

The proposal will remain open for public comment for 60 days after publication in the Federal Register.

SEC Examines 24-Hour U.S. Trading

On September 17, the SEC will hold a roundtable to examine how the U.S. securities market could prepare for 24-hour trading.

The attendees list includes representatives from Cboe, Citadel Securities, DTCC, NYSE, Nasdaq, Robinhood, and other major market firms.

The discussions will cover how to approach overnight market surveillance, liquidity, clearing and settlement, cybersecurity, system maintenance, and investor protection.

The SEC will also examine what infrastructure would eventually be required for a move toward 24/7 trading.  

The crypto industry is based on blockchain technology that never closes. Proposed 24-hour trading would be a major step for traditional markets.

If the SEC ultimately accommodates blockchain-based ownership records alongside 24-hour trading, the changes could narrow the gap between traditional securities infrastructure and crypto markets.

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