The U.S. House Financial Services Committee held its first dedicated hearing on securities tokenization on March 25, 2026, titled "Tokenization and the Future of Securities: Modernizing Our Capital Markets." Five witnesses — representing Wall Street incumbents, blockchain startups, and a former r...
"We stand at the threshold of a significant transformation in our financial landscape." — Rep. French Hill, Chairman, House Financial Services Committee
The U.S. House Financial Services Committee held its first dedicated hearing on securities tokenization on March 25, 2026, titled "Tokenization and the Future of Securities: Modernizing Our Capital Markets." Five witnesses — representing Wall Street incumbents, blockchain startups, and a former regulator — testified before a committee that reached bipartisan consensus on one point: tokenized securities are coming, and no statutory framework exists to govern them.
The hearing arrived during a week of concentrated institutional activity. On March 24, the New York Stock Exchange signed a memorandum of understanding with Securitize to co-develop a 24/7 tokenized equities platform. The same day, Invesco assumed management of Superstate's $967 million on-chain Treasury fund (USTB). Two days earlier, BlackRock CEO Larry Fink devoted a section of his 2026 annual letter to tokenization, writing that it could help "update the plumbing of the financial system." The on-chain RWA market stood at $26.48 billion as of March 23, up 5.25% in 30 days, according to RWA.xyz.
Yet witnesses identified at least six structural barriers preventing the market from scaling beyond its current 5–6% monthly growth rate — including a 44-year-old tax law that inadvertently bans tokenized bonds on public blockchains, and Basel capital rules that impose a 1,250% risk weight on permissionless chain exposures. Congress left with two draft bills and no clear timeline for resolution.
The committee assembled five witnesses spanning the full spectrum of market participants:
Kenneth Bentsen Jr., President and CEO of SIFMA, representing broker-dealers, investment banks, and asset managers employing one million workers across the U.S. securities industry. Bentsen's core argument: "Tokenized securities are securities. Technology does not change the underlying definition of the instrument." SIFMA's position favored integrating tokenized assets into the existing federal securities regulatory framework rather than creating parallel structures.
Summer Mersinger, CEO of the Blockchain Association and former CFTC Commissioner. Mersinger argued that competitors — Hong Kong, Singapore, Switzerland, the EU, and the UAE — are capturing infrastructure advantage through grants and pilot programs. She advocated for the SEC to use its existing exemptive relief authority to enable limited trading without waiting years for complete statutory frameworks.
John Zecca, Executive Vice President and Global Chief Legal, Risk and Regulatory Officer of Nasdaq, which has already obtained regulatory approval for its own tokenized stock framework.
Christian Sabella, Managing Director and Deputy General Counsel of the DTCC, which processes roughly $2.5 quadrillion in securities transactions annually and recently partnered with Digital Asset to tokenize DTC-custodied U.S. Treasury securities.
Salman Banaei, General Counsel of Plume Network (listed as Kimber Labs in some filings), a former SEC and CFTC official who identified six specific regulatory barriers limiting market expansion.
The tokenized RWA market has grown fourfold since early 2025, from approximately $6.5 billion to $26.48 billion as of March 23, 2026. Tokenized U.S. Treasuries alone have climbed to approximately $11 billion, a 22% increase from $8.9 billion at the start of the year, according to RWA.xyz data.
The four largest tokenized Treasury products and their year-to-date growth:
| Fund | Issuer | AUM (approx.) | YTD Growth | |------|--------|---------------|------------| | BUIDL | BlackRock | $1.9B | +26% | | USYC | Circle | $2.2B | +31% | | USDY | Ondo Finance | Not disclosed | +89% | | BENJI (OnChain Gov't Money Fund) | Franklin Templeton | $650M | +14% |
These figures represent a fraction of the addressable market. The global bond market exceeds $100 trillion outstanding. The U.S. bond market alone stands at $58.2 trillion. McKinsey projects $2–4 trillion in tokenized financial assets by 2030.
The growth rate, however, remains linear. The market expands at 5–6% per month rather than the exponential trajectory some industry projections suggest. Witnesses attributed this ceiling directly to regulatory constraints rather than technological limitations.
Banaei's testimony documented six barriers that collectively cap market growth:
The most technically specific barrier raised during testimony involves the Tax Equity and Fiscal Responsibility Act of 1982. TEFRA was written to prevent issuance of bearer bonds — physical certificates transferable without registration. Its language inadvertently captures tokenized bonds on any permissionless public blockchain where peer-to-peer transfers occur without traditional book-entry systems.
Under TEFRA, peer-to-peer token transfers are functionally indistinguishable from bearer bonds. The penalties are severe:
No issuer will voluntarily subject itself to these penalties. The result: tokenized bond issuance on public blockchains remains functionally prohibited for U.S. issuers until Congress amends TEFRA or Treasury issues guidance distinguishing blockchain-based transfers from bearer instruments.
Neither bill introduced at the hearing addresses this gap directly.
The Basel Committee on Banking Supervision's cryptoasset exposure standards, which took effect January 1, 2026, assign a 1,250% risk weight to assets on permissionless blockchains. This is the highest risk weight in the entire Basel framework — equivalent to requiring banks to hold dollar-for-dollar capital against the exposure.
For context: a $100 million position in tokenized Treasuries on a permissionless chain requires the same capital as $100 million in direct credit losses under the standardized approach. The underlying credit risk of the Treasury bond itself is unchanged. A tokenized Treasury and a traditional Treasury carry identical default risk. But the capital treatment diverges by orders of magnitude based solely on the settlement rail.
The Federal Reserve was scheduled to vote on its revised Basel III final-phase capital requirements as early as the week of March 16, 2026. FDIC Chairman Travis Hill has suggested future regulatory guidance on how banks can safely engage with permissionless systems, but no concrete timeline exists.
Until this capital treatment changes, banks cannot economically participate in tokenized asset markets on public chains. This forces tokenized assets into permissioned chains — which undermines the composability and liquidity benefits that make tokenization attractive in the first place.
SEC Chairman Paul Atkins has indicated that the Commission will "soon consider" an innovation exemption to facilitate limited trading of tokenized securities. The proposal, part of the broader "Project Crypto" regulatory initiative, is currently in clearance at the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget.
The expected framework: a time-bound safe harbor (12–36 months) allowing eligible firms to issue and trade tokenized securities without full SEC registration, while regulators assess risk, market behavior, and investor protection outcomes.
Mersinger's testimony urged the SEC to act through existing exemptive authority rather than wait for legislation, noting that competitors are already operating under comparable regulatory sandboxes in other jurisdictions.
Bentsen countered that any exemptive relief should be "narrow, transparent, time-bound," and should never substitute for formal rulemaking or bypass notice-and-comment procedures. His position: new market entrants using blockchain rails should face identical regulations as existing stock-trading businesses.
Bipartisan agreement on the inevitability of tokenization did not extend to the political dynamics surrounding it. Ranking Member Maxine Waters (D-CA) used the hearing to highlight what she called "blatant corruption" involving the Trump administration's crypto interests.
Waters cited an estimated $1 billion in profit from the Trump family's crypto ventures, including World Liberty Financial Inc., which announced a partnership with Securitize to tokenize loan revenue tied to hotel projects during the same week as the hearing. "Tokenization could make those trades faster, always on, and with fewer guardrails," Waters stated.
Banaei, the former regulator, acknowledged that Trump family ties have "created a cloud over legitimacy" of market structure legislation.
The political dimension matters for a specific reason: the CLARITY Act — which would determine whether tokenized assets fall under SEC (digital securities) or CFTC (digital commodities) jurisdiction — requires a Senate Banking Committee markup targeted for the second half of April. Passage requires 60 Senate votes. Democratic opposition rooted in conflict-of-interest concerns could delay or block the legislation.
The hearing occurred against a backdrop of accelerating institutional commitments:
NYSE + Securitize (March 24): The New York Stock Exchange signed an MOU with Securitize to co-develop a blockchain-based venue for 24/7 trading of tokenized U.S. equities and ETFs. The platform will preserve full shareholder rights including voting power and dividends — distinguishing it from derivative-based tokenized stock products. SEC and FINRA approval is required, with a target of late 2026.
Invesco + Superstate (March 24): Invesco, a $2.2 trillion asset manager, assumed management of Superstate's $967 million USTB tokenized Treasury fund. Upon completion of the transition (expected mid-2026), the fund will be renamed the Invesco Short-Duration U.S. Government Securities Fund while maintaining its USTB ticker, smart contracts, and token address. The fund has onboarded approximately 150 institutional investors and processed billions of dollars in transactions since its 2024 launch.
Nasdaq: Has already obtained regulatory approval for its own tokenized stock framework and engaged Kraken to distribute stock tokens globally.
Franklin Templeton + Ondo Finance: Secured a partnership for blockchain-based stock trading.
These moves demonstrate that the largest financial infrastructure operators are now building tokenized rails in parallel with traditional ones — regardless of regulatory clarity.
Viewed through the lens of economic value distribution, the tokenization of traditional securities raises a fundamental question: who captures the margin when settlement moves on-chain?
In the current system, intermediaries — custodians, clearinghouses, transfer agents, broker-dealers — extract fees at each step of the securities lifecycle. The DTCC alone processes roughly $2.5 quadrillion annually; its fee revenue reflects the economic rent of serving as the trust layer.
Tokenization promises to compress this intermediary stack. Same-day or atomic settlement reduces counterparty risk and the capital tied up in T+1 (or longer) settlement cycles. But the hearing made clear that existing intermediaries are not ceding ground — they are repositioning. DTCC is building tokenization tools. NYSE is building a tokenized equities platform. Nasdaq already has regulatory approval.
The economic value does not disappear; it migrates. Custody fees become smart contract audit fees. Transfer agent revenue becomes token infrastructure licensing. Clearing costs become gas fees or validator compensation. The key variable is whether new entrants (Securitize, Ondo, Plume) capture meaningful share, or whether incumbents absorb the technology while maintaining existing fee structures.
The 1,250% Basel risk weight and TEFRA prohibition serve, functionally, as regulatory moats protecting the existing intermediary architecture. Whether or not this is the intent, it is the effect.
The March 25 hearing formalized what market participants already knew: the United States has decided tokenized securities will happen. It has not decided how, when, or under whose rules.
The $26.48 billion on-chain RWA market is growing, but at a rate constrained by regulatory architecture designed for a pre-blockchain era. A 1982 tax law and a 2024 Basel standard — neither written with tokenization in mind — together constitute the most significant barriers to market expansion. Neither was directly addressed by the legislation introduced at the hearing.
Meanwhile, the largest financial institutions in the world are building parallel infrastructure. NYSE, Nasdaq, DTCC, BlackRock, Invesco, and Franklin Templeton are all making capital commitments to tokenized rails. They are not waiting for Congress.
The question is no longer whether tokenized securities will exist. It is whether the regulatory framework will arrive before the market outgrows its absence — and whether the political dynamics surrounding the CLARITY Act will permit the 60-vote threshold required for passage. The hearing provided consensus on the destination. It provided no roadmap for getting there.