The Fed says that tokenized securities are subject to the same capital rules

US regulators have clarified that tokenized securities will receive the same capital transactions as their traditional counterparts, saying the rules are “technology neutral”.

The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency said Thursday that they will treat traditional and tokenized securities equally when it comes to bank capital requirements.

“Technologies used to issue and trade securities generally do not affect its capital handling,” the agencies said.

“Tokenized securities shall be treated in the same manner as the non-tokenized form of securities under the capital rule,” added the new guidance.

Under the directive, financial institutions do not need to over-collateralize when holding securities on their balance sheets, as is required when holding unproven and volatile assets.

Many traditional financial firms have seen a growing interest in tokenization, which regulators say has prompted them to issue new guidance.

The agencies said that derivatives referring to the “eligible security form” should be treated as derivatives that refer to the tokenized form of the security.

Regulators added that tokenized securities also do not affect their ability to legally be considered financial collateral, as long as they are liquid and can be sold by an entity legally owned or controlled if the borrower defaults as part of the terms of the collateral agreement.