SEC Moves to Modernize Transfer Agent Rules for Blockchain Era

The US Securities and Exchange Commission (SEC) is proposing a major update to its transfer agent regulations as blockchain technology and tokenized securities become a bigger part of financial markets.

The agency’s plan would refresh rules that have largely remained unchanged since the late 1970s and early 1980s, when securities records were still dominated by paper certificates and manual processes. The proposed framework is designed to account for the way securities are increasingly issued, recorded and transferred through digital infrastructure.

The SEC said market participants are showing growing interest in blockchain-native, or “onchain,” transfer agents. These businesses could support blockchain-based recordkeeping, tokenized fund administration and systems that allow assets to move across different blockchain networks.

According to the regulator, its current framework does not fully address the risks created by these technologies. Cybersecurity, operational resilience and the protection of securities and investor records are among the areas the SEC wants to address.

The proposal would introduce broader reporting obligations and additional compliance requirements for transfer agents. It would also establish rules covering restrictive legends on securities and the involvement of third-party service providers.

The SEC's move comes as tokenization continues to attract attention across the financial sector. Traditional securities, funds and other financial instruments are increasingly being explored for issuance and settlement on blockchain networks, creating new questions around ownership records, transfers and investor protection.

The agency is also taking a broader look at how its securities regulations fit into increasingly digital markets.

Law firm Cahill Gordon & Reindel said the SEC is pursuing a wider effort to simplify and modernize its rulebook. The regulator proposed several changes to public-company reporting rules in May, including allowing companies to choose semiannual reporting, simplifying filer classifications and widening access to streamlined registered securities offerings.

The SEC has also been reviewing its custody framework for investment advisers and investment companies. Last week, proposed changes were sent to the White House for review, including potential provisions affecting how firms safeguard crypto assets held for clients.

Those changes could eventually provide more defined expectations for investment advisers and funds dealing with digital assets under federal securities regulations.

For the transfer agent proposal, the SEC is now seeking public feedback. Comments will be accepted for 60 days after the proposal is published in the Federal Register.

If adopted, the updated rules would mark a significant shift from a framework created for a largely paper-based securities industry toward one designed to accommodate blockchain networks, tokenized assets and increasingly automated financial infrastructure.