US banks can treat tokenized securities as equivalent to conventional securities for capital purposes. That’s according to a joint announcement by the US Federal Reserve, the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). This FAQ was a bank recommendation in the White House report on digital assets, published last year.
The US position is more permissive than the international one from the Basel Committee on Banking Supervision (BCBS) currently under review. While the BCBS also allows equivalent treatment, it has caveats and does not treat securities on permissionless blockchains as equivalent. That means there is a prohibitive risk weighting of 1250%. The Fed’s frequently asked questions (FAQs) explicitly support equal treatment for permissionless chains, but retains two high level caveats.
Firstly, the tokenized security must have the same legal treatment as a conventional one. A recent SIFMA submission to the SEC Crypto Task Force defined three categories of tokens: direct issuance (eg. tokenized Galaxy stock), security entitlement tokens (eg. the coming DTCC tokenized securities) and wrapped tokens.
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