The U.S. House Financial Services Committee held its first dedicated hearing on tokenized securities on March 25, 2026, convening five witnesses from DTCC, Nasdaq, SIFMA, the Blockchain Association, and Plume Network to assess a $26.48 billion on-chain real-world asset market that has grown fourf...
"The ties between the Trump family and this industry has unfortunately created a cloud over the legitimacy of moving forward on this important market structure legislation." — Salman Banaei, General Counsel, Plume Network (former SEC and CFTC official)
The U.S. House Financial Services Committee held its first dedicated hearing on tokenized securities on March 25, 2026, convening five witnesses from DTCC, Nasdaq, SIFMA, the Blockchain Association, and Plume Network to assess a $26.48 billion on-chain real-world asset market that has grown fourfold in twelve months. The hearing produced bipartisan consensus that tokenized securities are structurally inevitable — and that no adequate federal regulatory framework exists to govern them.
The session surfaced specific, previously under-examined barriers: a 1982 tax law (TEFRA) that functionally prohibits tokenized bonds on permissionless blockchains; Basel Committee risk weights that impose 1,250% capital charges on certain blockchain-based exposures; and a fragmented regulatory jurisdiction between the SEC and CFTC that two pending bills attempt to resolve. Meanwhile, DTCC is preparing to launch its SEC-approved tokenization pilot on the Canton Network in H2 2026, and institutional asset managers including BlackRock ($2.8B BUIDL fund), Franklin Templeton ($800M+ BENJI), and Invesco ($900M USTB via Superstate) are deploying capital into tokenized Treasuries at scale.
This report examines the competing regulatory models under consideration, the structural barriers to institutional adoption, and the economic value distribution implications of moving $58.2 trillion in U.S. bond market infrastructure onto blockchain rails.
The March 25 hearing, titled "Tokenization and the Future of Securities: Modernizing Our Capital Markets," was chaired by Representative French Hill. The five-witness panel represented the full institutional spectrum:
| Witness | Organization | Role | |---------|-------------|------| | Kenneth Bentsen Jr. | SIFMA | President & CEO | | Summer Mersinger | Blockchain Association | CEO (former CFTC Commissioner) | | John Zecca | Nasdaq | EVP, Chief Legal/Risk/Regulatory Officer | | Christian Sabella | DTCC | Managing Director, Deputy General Counsel | | Salman Banaei | Plume Network (Kimber Labs) | General Counsel (former SEC/CFTC official) |
Witnesses agreed unanimously on one point: existing securities laws already apply to tokenized instruments. "A tokenized share is still a share," Zecca stated, arguing that changes in technology should not alter the legal status of the underlying asset. Bentsen advocated for "narrow, time-limited and transparent" innovation exemptions rather than wholesale deregulation. Mersinger recommended an "iterative approach" from the SEC, noting that tokenization "remove[s] a lot of intermediaries that add expenses to the trade."
The political fault lines were visible. Representative Maxine Waters raised concerns about the "gamification of trading" through faster, always-on tokenized markets. Representative Brad Sherman criticized proposals lacking robust KYC and AML protections. Representative Ann Wagner warned that regulatory uncertainty risks pushing tokenization activity to Singapore and Hong Kong — a point corroborated by Banaei's testimony that institutional demand is already migrating offshore. "The demand is global, and the benefits are local," Banaei stated.
The hearing did not produce legislation. It produced something arguably more significant: bipartisan acknowledgment, on the record, that tokenized securities are structurally inevitable and that no adequate framework exists.
According to RWA.xyz data as of March 23, 2026, the tokenized real-world asset market reached $26.48 billion in on-chain value, excluding stablecoins. This represents a fourfold increase from approximately $6.6 billion one year earlier. Monthly growth has stabilized at 5-6%, according to testimony by Banaei.
Six asset categories have individually surpassed the $1 billion threshold:
| Asset Category | Estimated On-Chain Value | Key Issuers | |---------------|------------------------|-------------| | Private Credit | ~$18.9B (cumulative originations: $33.7B) | Maple, Goldfinch, Centrifuge | | U.S. Treasuries | ~$5.8B (some sources cite up to $12B) | BlackRock BUIDL, Franklin Templeton BENJI, Ondo USDY/OUSG | | Commodities | >$1B | Paxos (PAXG), Tether (XAUT) | | Corporate Bonds | >$1B | Various institutional issuers | | Non-U.S. Government Debt | >$1B | Institutional platforms | | Institutional Alt Funds | >$1B | Securitize, Superstate (USTB) |
A critical structural observation from PYMNTS.com reporting: on-chain transfers typically range around $10 million per transaction, indicating institutional allocation batching rather than retail trading activity. As the report noted, "much of the activity relates to asset issuance and not active trading." This distinction matters for evaluating the market's maturity: the $26.48 billion figure represents primarily assets parked on-chain, not a liquid trading market.
BlackRock's BUIDL fund dominates tokenized Treasuries with approximately $2.8 billion in AUM. Franklin Templeton's BENJI exceeds $800 million across seven blockchain networks. In March 2026, Invesco assumed management of Superstate's $900 million USTB fund, marking the entry of a second major traditional asset manager into active tokenized Treasury management.
The hearing surfaced three distinct regulatory approaches, each with different implications for market structure:
Model 1: Innovation Exemptions (Industry Preferred)
Bentsen and SIFMA advocated for temporary, scoped exemptions — allowing broker-dealers and transfer agents to use blockchain-based record-keeping while maintaining existing investor protections. The Capital Markets Technology Modernization Act, one of two draft bills referenced in the hearing, would codify this approach. This model preserves the existing intermediary structure but permits blockchain as a back-end settlement layer.
Model 2: Joint Regulatory Study (Legislative Default)
The Modernizing Markets Through Tokenization Act would require the SEC and CFTC to conduct a joint study on whether additional guidance or rules are needed. This approach defers substantive rulemaking. The two agencies signed a joint coordination pact in March 2026, but jurisdiction remains divided: the SEC regulates securities tokens, the CFTC governs derivatives and certain commodities, and the boundary between them for hybrid tokenized instruments remains undefined.
Model 3: Comprehensive Rulemaking (Democratic Position)
Sherman and Waters argued that tokenized securities require comprehensive regulation before market expansion, not after. This position emphasizes KYC enforcement on public blockchains, prevention of anonymous foreign ownership through self-hosted wallets, and AML compliance embedded at the protocol level. Sabella's DTCC testimony partially addressed this by proposing immutable identifying information embedded at the token level, functional across both permissioned and permissionless networks.
The central tension, as described by industry testimony, is whether narrow exemptions can coexist with decades of investor protection law, or whether they create a two-tiered market where tokenized securities trade under lighter rules than their traditional counterparts.
Banaei's written testimony identified six structural barriers explaining the measured 5-6% monthly growth rate. Two are particularly consequential:
The TEFRA Problem
The Tax Equity and Fiscal Responsibility Act of 1982 was written to prohibit bearer bonds used for money laundering and tax evasion. Tokenized bonds on permissionless public blockchains — where peer-to-peer transfers occur between self-custodied wallets without a traditional book-entry system — are functionally indistinguishable from bearer instruments under TEFRA's current language. The penalties are severe:
This creates a structural barrier that no amount of SEC or CFTC guidance can resolve. TEFRA is tax law under Treasury and IRS jurisdiction. Until it is amended, tokenized bond issuance on permissionless chains carries material legal risk. This barrier was not publicly examined before the March 25 hearing.
Basel Capital Requirements
The Basel Committee's cryptoasset standard, effective January 1, 2026, classifies crypto exposures into groups:
The practical consequence: banks holding tokenized Treasuries on a permissioned blockchain that meets Group 1a conditions face standard risk weights. The same Treasuries on a permissionless chain that fails classification conditions could face 1,250% risk weights. This regulatory asymmetry structurally favors permissioned networks — which is precisely where DTCC's Canton Network pilot operates.
Additional barriers identified in testimony include 1-3% pricing gaps between tokenized and traditional instruments, 2-5% cross-chain settlement friction, and a rate environment disadvantage where traditional money markets yield 4.2-5.3% compared to 3-4% for on-chain lending.
DTCC's partnership with Digital Asset Holdings represents the most consequential infrastructure development in the tokenized securities space. Following the SEC's December 11, 2025 no-action letter, DTCC is building tokenization services on the Canton Network — a permissioned blockchain where DTCC co-chairs governance alongside Euroclear.
Timeline:
Eligible Assets (Phase 1):
DTCC will use its ComposerX platform suite to enable tokenization. The no-action letter is scoped narrowly: it does not establish a general regulatory framework, nor does it provide relief to other market participants building competing services. This effectively grants DTCC a first-mover regulatory advantage in institutional tokenized securities infrastructure.
The structural implication is significant. DTCC currently clears and settles virtually all U.S. equity and bond trades. If its Canton Network tokenization service becomes the institutional standard, the existing intermediary structure is preserved — securities move from a centralized book-entry system to a permissioned blockchain book-entry system, with DTCC maintaining its central role. The 66% of institutional investors who cite regulatory uncertainty as a barrier to digital asset investment, according to a January 2026 EY-Parthenon and Coinbase survey, may find DTCC's regulated framework sufficiently familiar to begin allocation.
The tokenization narrative centers on disintermediation — removing layers of cost from financial infrastructure. Mersinger's testimony that tokenization "remove[s] a lot of intermediaries that add expenses to the trade" reflects this premise. The economic reality is more nuanced.
Current Intermediary Cost Structure (U.S. Bond Market): The $58.2 trillion U.S. bond market generates fees across custodians, transfer agents, clearinghouses, broker-dealers, and settlement agents. These fees collectively represent billions in annual revenue for firms including DTCC, BNY Mellon, State Street, and the major broker-dealers.
Tokenization's Value Redistribution:
However, DTCC's pilot suggests the institutional path is not disintermediation but re-intermediation on new rails. DTCC, Nasdaq, and SIFMA member firms are positioning to become the gatekeepers of tokenized markets, maintaining their economic position while upgrading infrastructure. The economic value does not redistribute to end investors or issuers; it migrates from legacy technology vendors to blockchain infrastructure providers, with the same financial institutions retaining their intermediary role.
The McKinsey projection of a $2-4 trillion tokenized market by 2030 implies substantial fee revenue at stake. At even a conservative 10 basis point average fee across custody, settlement, and trading, a $2 trillion tokenized market generates $2 billion in annual fees. The question is not whether those fees exist but which entities capture them.
The March 25 hearing established bipartisan congressional consensus that tokenized securities are structurally inevitable. No legislation was produced, but two draft bills (Capital Markets Technology Modernization Act and Modernizing Markets Through Tokenization Act) frame the next legislative steps.
The on-chain RWA market reached $26.48 billion as of March 23, 2026, growing at 5-6% monthly. Six asset classes have individually surpassed $1 billion. Transaction sizes averaging $10 million indicate institutional, not retail, adoption.
TEFRA (1982 tax law) creates a previously unexamined legal barrier that functionally prohibits tokenized bond issuance on permissionless blockchains. This is a tax code problem, not a securities regulation problem, and requires legislative amendment.
Basel Committee rules effective January 2026 create a structural asymmetry: tokenized assets on permissioned chains can receive standard risk weights, while identical assets on permissionless chains risk 1,250% capital charges.
DTCC's SEC-approved Canton Network pilot, launching in H2 2026, positions the existing clearinghouse as the institutional gatekeeper of tokenized securities — preserving the intermediary structure on new technological rails rather than eliminating it.
The political environment is complicated by Trump family financial interests in crypto ventures (estimated at $1 billion through World Liberty Financial), which multiple witnesses and lawmakers identified as creating legitimacy concerns for market structure legislation.
The March 25 hearing clarified the structural state of tokenized securities in the U.S.: the technology works, institutional capital is deploying ($2.8B BUIDL, $900M USTB, $800M+ BENJI), and the regulatory framework has not kept pace. The CLARITY Act markup in the Senate Banking Committee, targeted for the second half of April, represents the next legislative checkpoint.
The deeper finding from the hearing is that the barriers to tokenized securities adoption are not primarily technological or market-driven. They are legal (TEFRA), prudential (Basel risk weights), and political (jurisdictional fragmentation between SEC and CFTC, complicated by executive-branch financial entanglements). Each barrier requires a different institutional actor to resolve — Congress for TEFRA, the Basel Committee for risk weights, and the SEC/CFTC for jurisdictional clarity.
The economic value distribution question remains open. If DTCC's permissioned model becomes the institutional standard, tokenization delivers operational efficiency (faster settlement, programmable compliance) without materially redistributing fee revenue away from existing intermediaries. If permissionless protocols capture meaningful market share, the value redistribution is larger but the regulatory path is longer. The hearing made clear that Congress, for now, is more comfortable with the former.