Frequently Asked Questions Regarding the Capital Treatment of Tokenized Securities

Summary:

The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Board of Governors of the Federal Reserve System, (collectively, the agencies) are issuing answers to frequently asked questions (FAQ) concerning the capital treatment of tokenized securities. 

Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-insured financial institutions.

Highlights:

• A security is often referred to as “tokenized” when ownership rights in the security are represented using distributed ledger technology.
• The agencies jointly issued the attached answers to commonly asked questions concerning the capital treatment of tokenized securities.
• The FAQs provide clarity on the capital treatment for eligible tokenized securities and whether a tokenized security would qualify as financial collateral for purposes of the capital rule. The FAQs also clarify that the capital rule does not provide a different treatment based on the use of permissioned or permissionless blockchains.
• The capital rule for banking organizations implemented by the agencies is technology neutral and technologies used to issue and transact in a security do not generally impact its capital treatment.