SEC Chairman's Conceptual Framework: New Regulations for DLT and Tokenized Securities

Recently, SEC Chairman Gary Gensler shared an important insight on the All-In Podcast: the concept of Distributed Ledger Technology (DLT) could bring profound changes to financial markets. He explained that this technology’s meaning is not just about technical innovation but also marks the arrival of a new era where financial services could be completely redefined.

T+0 Settlement: The New Concept of Digital Financial Transactions

According to Gensler, the industry is going through a critical phase where understanding the concept of T+0 settlement is essential. In this new system, securities delivery and payment can be completed instantly, even allowing direct payments through on-chain digital assets. The SEC Chairman considers this development “very promising” because it could lead to unprecedented efficiency improvements in the financial sector.

However, Gensler also noted that practical implementation of this approach involves risks. To prevent issues like fraud, the system will need “slowing mechanisms.” These security measures will ensure that speed and safety work hand in hand.

Regulatory Concept of Tokenized Securities

Tokenizing securities is a key topic where clarity of the concept is necessary. The SEC’s fundamental principle is that if an asset is inherently a security, then even if it is converted into a token on the blockchain, its legal nature remains a security. This means all federal securities laws must be strictly followed, regardless of how advanced the technology is.

Gensler emphasized that understanding the meaning of this concept is crucial for both regulators and market participants. Tokenization is not just a technical tool; it defines a new legal framework.

Understanding the Concept of Liquidity and Trading Structures

Gensler acknowledged that this model still faces some serious challenges. Liquidity issues are a major concern. In traditional markets, the concept of “best bid and ask prices” is closely tied to deep market understanding.

How this concept will be represented in the new system remains a key question. In decentralized market structures, price discovery mechanisms may be difficult to operate like traditional centralized exchanges.

SEC’s Inspection Approach: The Evolving Meaning of Securities Laws

A vital responsibility of the SEC is to ensure that regulatory authority adapts to new applications. Gensler explained that as trading purposes and distribution methods change, the meaning of regulatory concepts must also evolve over time.

The SEC is currently conducting a comprehensive review of each section of existing rules. The goal is to determine whether current regulations are suitable for emerging technological conditions. Where necessary, rules will be updated at the institutional level to ensure the health of markets and the protection of investors in the new system.

This approach shows that the SEC’s concept of regulation is not limited to strict control but aims to balance technological innovation with investor protection.