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The Federal Reserve and US banking regulators have clarified that tokenized securities are subject to the same capital treatment as traditional assets.US regulators have clarified that tokenized securities will receive the same capital treatment as their traditional counterparts, saying the rules are “technology neutral.
”“The technologies used to issue and transact in a security do not generally impact its capital treatment,” the agencies said. “An eligible tokenized security should be treated in the same manner as the non-tokenized form of the security would be treated under the capital rule,” the new Under the guidance, financial institutions won’t need to over-collateralize when holding tokenized securities on their balance sheets, as is required when holding unproven and volatile assets. Many traditional finance companies have shown increasing interest in tokenization, which regulators said prompted them to issue the new guidance.The agencies said that derivatives referencing an “eligible tokenized security” should also be treated, for capital purposes, as derivatives referencing the non-tokenized form of the security. The regulators added that tokenized securities are also not affected in their ability to be legally deemed financial collateral, so long as they are liquid and legally owned or controlled by an institution that can sell them if the borrower fails to pay, as part of the terms of a collateral agreement. “An eligible tokenized security that satisfies the definition of ‘financial collateral’ would qualify as financial collateral for purposes of the capital rule and may be recognized by the banking organization as a credit risk mitigant if all the other relevant requirements in the capital rule are met,” the regulators said.What’s a ‘Network State’ and are there real-life examples? Big Questions Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently. Read our Editorial Policy
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Boris Bohrer-Bilowitzki's articles on CointelegraphThe author is an independent contributor writing an opinion or expert take. Views expressed are the author’s own and may not reflect Cointelegraph’s editorial position. Boris Bohrer-Bilowitzki is the CEO of Concordium, a layer-1 blockchain designed for real-world adoption through built-in identity and compliance at the protocol level.
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