Financial institutions should treat an eligible tokenized security in the same manner as the non-tokenized form of the security under the capital rule, the Federal Reserve, FDIC and Office of the Comptroller of the Currency said today in a new FAQ.
A security is referred to as “tokenized” when ownership rights in the security are represented using distributed ledger technology, according to the agencies. The joint agency FAQ seeks to provide clarity on the capital treatment of tokenized securities and whether a tokenized security would qualify as financial collateral for purposes of the capital rule.
The document also states that the capital rule does not provide a different treatment based on the use of permissioned or permissionless blockchains, the agencies said.
“As with any exposure, banking organizations holding tokenized securities must apply sound risk-management practices and comply with applicable regulations,” the FAQ states.
