The Crypto Era: Are the laws from the 70s about to be updated?

The US Securities and Exchange Commission (SEC) proposes to make significant changes to the rules applicable to transfer agents, the entities responsible for managing records of stock ownership and documenting transfers between investors. These regulations originated in the late 70s and early 80s, and the Commission now seeks to adapt them to a reality where the capital market is becoming increasingly digital.

In the traditional financial world, a transfer agent maintains official ownership records through computerized systems. In the new digital landscape, ownership can be managed using blockchain, a digital ledger that allows transactions to be recorded in a transparent and decentralized manner. The SEC has previously clarified that blockchain technology can be used to manage shareholder records, provided that legal requirements regarding security, reporting, and data retention are met.

The Commission's proposal is driven by the rise of "tokenization"—the process of turning an asset, such as a stock, real estate, or a bond, into a digital asset tradable via blockchain. Instead of ownership transfers being recorded only in a financial institution's internal system, they can be carried out through digital infrastructure operating 24/7 in real-time. This idea is no longer theoretical: major financial institutions are developing systems to trade such assets, while crypto companies are beginning to assume roles previously reserved for traditional financial institutions.

The update proposed by the SEC does not focus solely on blockchain. The Commission seeks to adapt rules to the widespread use of electronic systems and artificial intelligence. In a document spanning hundreds of pages, it addresses risks associated with the reliability of information on the blockchain, the security of digital assets, and the use of automated systems, ensuring that the transition to new technology does not compromise investor protection.

The broader implication is that crypto is deeply penetrating the traditional financial system. While digital assets were once perceived as a field separate from the stock market, regulators are now preparing the infrastructure for a world where stocks might pass from hand to hand much like digital currency.

If approved, this proposal would represent a significant step in replacing regulations built for a different financial era. The new rules will align with a market where blockchain, tokenization, and artificial intelligence are integral parts of the global economy.