Key Takeaways:

  • The U.S. regulator is proposing to modernize rules governing transfer agents.
  • The draft would allow the use of blockchains as an official ledger for transactions.
  • A roundtable discussion on round-the-clock trading will be held on September 17 in Washington.

The SEC proposed a reform on Tuesday to the rules governing transfer agents, which would authorize the use of blockchains as an official registry for securities transactions. The U.S. regulator also announced the agenda for its September 17 roundtable dedicated to round-the-clock trading.

What the transfer agent reform would change

These entities, though little known to the general public, maintain the official records of changes in security ownership. Their role is to track who owns what and when, serving as the official record-keeper.

The advent of on-chain transactions has disrupted this function. Since these operations execute instantly and publicly, much of the existing infrastructure—designed for delayed and opaque settlement—is becoming obsolete as markets embrace tokenized securities.

The proposed text modernizes a rule that has remained unchanged for decades by integrating the use of electronic communications and blockchain technology for securities issuances and share transfers, notes Paul Atkins, chair of the institution.

The trade-off comes in the form of new obligations. The companies involved would face additional oversight regarding their operations, particularly in terms of cybersecurity.

A commissioner's central question

SEC Commissioner Hester Peirce raised a point of direct interest to the crypto sector.

“Must transfer agents continue to collect the names and physical addresses of security holders?” she asked, or should the rule allow for other identifiers, such as an email address or a digital wallet address?

The stakes go beyond mere administrative formality. Recognizing a wallet address as a valid identifier for a security holder would essentially admit that a shareholder can exist in the records without a declared domicile, challenging decades of established investor identification practices.

The consultation remains open for 60 days.

A roundtable on round-the-clock trading

The second initiative concerns market hours. The September 17 meeting at the regulator's headquarters in Washington will bring together the main players of the U.S. financial infrastructure: NYSE, Nasdaq, State Street, Citadel Securities, Cboe, and the DTCC, alongside newer entrants like Robinhood.

Discussions will focus on four concrete topics: monitoring overnight trading, setting closing prices, clearing and settlement of transactions, and the practical aspects of a permanent system, starting with maintenance windows.

This final point summarizes the challenge. A market that never closes no longer has downtime to shut down systems, correct errors, or calculate end-of-day positions.

A shift in perspective

The crypto industry was born in an environment that never sleeps. Moving traditional markets to this regime, however, would represent a profound rupture.

One potential side effect is worth noting for industry participants: crypto brokers could find themselves subject to rules stemming from this effort, designed for all securities markets. In other words, the alignment of trading hours could come with an alignment of compliance obligations.

Both texts join proposals published last month by the regulator regarding digital asset issuances, featuring registration exemptions up to 75 million dollars.

What's next?

Three deadlines are approaching: the September 17 roundtable, the closure of the transfer agent consultation in two months, and the return of the CLARITY Act to the Senate, with a procedural vote expected by mid-September.

The method chosen by the regulator is noteworthy. In the absence of federal legislation on digital assets, the SEC is building its framework through regulation, text by text. This approach implements measures faster than legislation, though it remains just as susceptible to reversal following shifts in political majorities leading the agencies.

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