The House Financial Services Committee held its most significant tokenization hearing on March 25, 2026, titled "Tokenization and the Future of Securities: Modernizing Our Capital Markets." Five witnesses — representing Wall Street incumbents, blockchain firms, and former regulators — testified b...
"We stand at the threshold of a significant transformation in our financial landscape." — French Hill, Chairman, House Financial Services Committee
The House Financial Services Committee held its most significant tokenization hearing on March 25, 2026, titled "Tokenization and the Future of Securities: Modernizing Our Capital Markets." Five witnesses — representing Wall Street incumbents, blockchain firms, and former regulators — testified before a committee that reached bipartisan consensus on one point: tokenized securities are coming. The legal framework governing them does not yet exist.
The hearing arrived at a market inflection. On-chain real-world asset (RWA) value stands at $26.58 billion, up 5.58% in 30 days. Tokenized U.S. Treasuries alone account for approximately $12 billion. Invesco assumed management of Superstate's $900 million USTB fund on March 24. Franklin Templeton and Ondo Finance announced 24/7 tokenized ETF trading through crypto wallets on the same day. The $2.2 trillion asset manager Invesco joins BlackRock, Franklin Templeton, and Fidelity in active on-chain fund operations.
Yet the hearing exposed structural barriers that current legislation does not address. A 1982 tax law — TEFRA — inadvertently prohibits tokenized bearer bonds on permissionless blockchains. Basel III capital rules impose a 1,250% risk weight on permissionless blockchain assets, making bank participation roughly 12 times more expensive than holding the same asset in traditional form. And lawmakers remain split on whether to grant temporary innovation exemptions or require full rulemaking before tokenized markets can scale.
The witness panel reflected the tokenization market's current fault lines — traditional finance incumbents seeking orderly integration versus blockchain-native firms warning of regulatory-driven capital flight.
Kenneth Bentsen Jr., President and CEO of SIFMA — the trade group representing broker-dealers and investment banks — argued that new entrants to tokenized securities markets should receive "the same regulations and guardrails as businesses currently involved in stock trading." His position: tokenization changes the delivery mechanism, not the underlying asset. Existing securities law should apply.
Summer Mersinger, CEO of the Blockchain Association and former CFTC Commissioner, countered that non-custodial, decentralized finance code removes intermediaries "that add expenses to the trade." She advocated for an "iterative approach" from the SEC — regulatory sandboxes and phased implementation rather than comprehensive rulemaking before any tokenized product can launch.
John Zecca represented Nasdaq, which received SEC approval four days before the hearing to trade certain tokenized stocks and ETFs on blockchain rails alongside traditional shares. Christian Sabella testified on behalf of DTCC, the clearinghouse that settles roughly $2.4 quadrillion in securities annually.
Salman Banaei, General Counsel of Kimber Labs (operator of the Plume blockchain) and a former SEC and CFTC official, delivered the sharpest warning: American tokenization infrastructure is migrating offshore due to regulatory uncertainty. He urged Congress to act before critical market plumbing relocates permanently to jurisdictions with clearer frameworks.
The tokenized RWA market has quadrupled from $6.5 billion in early 2025 to $26.58 billion as of the hearing date. Key data points:
McKinsey projects the tokenized asset market could reach $2–4 trillion by 2030. Current penetration remains below 0.1% of global assets.
The week of the hearing saw two major product announcements. On March 24, Invesco — managing $2.2 trillion in traditional assets — took over Superstate's USTB fund, the second-largest tokenized Treasury product. The fund will be renamed Invesco Short Duration US Government Securities Fund while retaining its on-chain token infrastructure. Superstate continues to operate the technology layer: token issuance, on-chain settlement, and digital transfer agent services.
On March 25, Franklin Templeton ($1.7 trillion AUM) and Ondo Finance announced tokenized ETFs covering U.S. equities, fixed income, and gold, tradeable 24/7 through crypto wallets. Initial markets include Europe, Asia-Pacific, the Middle East, and Latin America — notably excluding the United States due to regulatory ambiguity.
The hearing identified four specific regulatory obstacles that no pending legislation fully addresses.
The Tax Equity and Fiscal Responsibility Act of 1982 was designed to prevent tax evasion through anonymous bearer bonds. Its provisions inadvertently apply to tokens on permissionless blockchains, which lack the centralized registrar TEFRA assumes.
The penalties are severe: denial of interest deductions for issuers, excise taxes at issuance, reclassification of capital gains, and a 30% withholding tax on interest payments regardless of investor residence. No witness proposed a specific legislative fix, though Banaei flagged it as the single largest barrier to U.S. tokenized bond issuance.
The Basel Committee on Banking Supervision classifies assets on permissionless blockchains as Group 2 — the same category as unbacked cryptocurrencies. This imposes a 1,250% risk weight, the maximum possible under the framework.
In practice, holding tokenized S&P 500 shares on a public blockchain costs a bank approximately 12 times more in capital reserves than holding the same shares through traditional custody. The Basel Committee has stated it "does not believe that banks can address the risks of permissionless blockchains" and will "continually assess" whether this position should change.
This creates a structural barrier: the largest tokenized funds (BlackRock's BUIDL, Superstate's USTB) operate on Ethereum, a permissionless blockchain. Banks cannot hold these products without punitive capital charges.
Witnesses cited pricing gaps of 1–3% across different blockchains for the same tokenized asset, with cross-chain capital transfer friction adding another 2–5% in costs. No interoperability standard exists. The DTCC representative noted that existing clearing infrastructure handles multi-venue settlement but has no mechanism for cross-chain reconciliation.
NASAA — the association representing state securities regulators across all 50 states — submitted a letter for the record cautioning that tokenized instruments with securities characteristics must remain subject to existing securities laws regardless of format. The letter urged Congress to preserve state regulatory authority and warned against using tokenization to circumvent investor protections, particularly for retail participants.
According to data cited during the hearing, on-chain asset seizure rates run approximately 12%, compared to roughly 0.2% in traditional finance (per UN estimates). Whether this represents a feature or a risk depends on the custody model — a question the hearing did not resolve.
The hearing's most urgent subtext: other jurisdictions are not waiting for U.S. action.
European Union: MiCA enters full enforcement by July 1, 2026. The EU's DLT Pilot Regime, operational since 2023, provides a specific legal pathway for tokenized securities trading. In March 2026, AMINA Bank AG became the first regulated bank to serve as a listing sponsor on 21X, Europe's first fully licensed DLT trading and settlement system. Combined with Tokeny's ERC-3643 issuance platform, Europe now has an end-to-end, regulation-native tokenization stack from issuance to settlement.
A $1.2 billion European commercial real estate RWA fund was oversubscribed with tight spreads in March, demonstrating institutional demand under clear regulatory frameworks.
Singapore: The Monetary Authority of Singapore's Payment Services Act covers digital payment token services. The MAS BLOOM sandbox is actively testing stablecoin-based trade finance. Singapore has authorized multiple token service providers with explicit licensing requirements.
Switzerland: FINMA provides clear guidelines for tokenized assets. Swiss-regulated institutions like AMINA Bank are already operating cross-border tokenization infrastructure.
Franklin Templeton's decision to launch its Ondo-partnered tokenized ETFs in Europe, Asia-Pacific, the Middle East, and Latin America first — excluding the U.S. — was not coincidental. As Banaei testified, American firms face a choice between waiting for domestic regulatory clarity or building abroad. Many are choosing the latter.
The central policy disagreement at the hearing was whether to permit experimentation before comprehensive regulation or require full rulemaking first.
Pro-exemption position (Mersinger, Banaei): The SEC should issue temporary innovation exemptions — similar to the EU's DLT Pilot Regime — allowing regulated entities to test tokenized securities under defined parameters. Mersinger argued that waiting for comprehensive rules risks ceding market infrastructure to foreign jurisdictions permanently.
Pro-rulemaking position (Bentsen, NASAA): Tokenized securities are securities. Existing registration requirements, broker-dealer rules, and investor protection standards apply. Exemptions create regulatory arbitrage and risk investor harm. Bentsen argued that the technology is new; the asset class is not.
Nasdaq and DTCC occupied middle ground: Both organizations already have SEC-approved frameworks. Nasdaq's recently approved tokenized trading proposal and DTCC's existing clearing infrastructure position them to handle tokenized securities within current rules — provided those rules are clarified, not relaxed.
The CLARITY Act, which passed the House 294–134 on July 17, 2025, addresses part of this debate. Sections 108 and 505 establish whether a tokenized asset is a digital security (SEC jurisdiction) or digital commodity (CFTC jurisdiction). Senate Banking Committee markup is targeted for the second half of April 2026. The SEC-CFTC joint interpretive release published March 17 — a 68-page document establishing a five-category token taxonomy — provides interim guidance but lacks statutory force.
Ranking Member Maxine Waters (D-CA) introduced a political dimension, citing estimates that the Trump family has earned approximately $1 billion from crypto ventures including World Liberty Financial. She warned that "tokenization could make those trades faster, always on, and with fewer guardrails," drawing a comparison to gamification in retail trading apps.
The Trump–Securitize connection — World Liberty Financial's partnership for hotel project tokenization — creates bipartisan tension around legislation that could directly benefit presidential business interests. This political overhang complicates an otherwise bipartisan policy consensus and may slow the CLARITY Act's Senate passage.
The March 25 hearing marked the first time Congress formally acknowledged that tokenization has moved beyond pilot programs into production-scale financial infrastructure. The data supports this: $26.58 billion on-chain, $12 billion in tokenized Treasuries, and three of the five largest global asset managers operating tokenized funds.
The harder question — which the hearing raised but did not answer — is whether the U.S. regulatory apparatus can adapt before market infrastructure relocates permanently. TEFRA was written for paper bearer bonds. Basel III's 1,250% risk weight was designed for unbacked cryptocurrencies, not tokenized Treasury bills. Neither was designed for a world where BlackRock, Franklin Templeton, and Invesco issue fund shares as blockchain tokens.
Every week without clarity is a week in which product launches, engineering teams, and institutional capital flow to jurisdictions that have already decided. The EU's MiCA deadline is July 1, 2026. The CLARITY Act markup is targeted for late April. The gap between those two dates may determine whether U.S. capital markets lead the tokenization transition or follow it.