The US Securities and Exchange Commission (SEC) has continued its push to accommodate digital assets and DLT platforms within the legal framework for securities trading with a proposal that formally allows for DLT platforms to be used by transfer agents as a primary record keeper.
The proposal represents a plan for the first major overhaul of transfer agent rules since the late 1970s/early 1980s, when the securities industry relied in the most part on manual data processing and physical paper certificates. The SEC is now seeking to align regulatory oversight with modern automated ecosystems, explicitly providing clear guardrails for the burgeoning market of digital assets and tokenised securities.Transfer agents perform an essential role for securities clearance and settlement. They maintain an issuer’s official records of security ownership, registering ownership transfers, monitoring issuances and tracking the daily issuance and cancellation of securities.
The proposal transforms how transfer agents use DLTs by cleaning up existing regulatory ambiguities. The SEC’s proposal is to amend certain legal definitions to explicitly include instructions transmitted by or through “an electronic system controlled, operated, or enabled by the transfer agent.”
This deliberately catch-all phrasing ensures that the legal definition applies equally to existing non-DLT record-keeping applications, DLT platforms, as well as future implementations. In the past, operations that made use of DLTs to keep track of securities ownership also were required to track that ownership in a non-DLT system, and keep both records aligned and consistent.
If the proposal is implemented, transfer agents can formally use DLTs as official infrastructure to issue, custody, and transfer shares, understanding that DLT records carry the same compliance weight as traditional certificated tracking. This approach will likely lead to significant simplification of post-trade systems design and reduce costs to manage them considerably.
The proposal also enforces strict operational processing timelines that directly impact DLT use, requiring all records to be processed within one business day. For transfer agents running on always-on DLTs, this proposal requires that transaction processing and master file updates must occur simultaneously and rapidly.
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