The US Securities and Exchange Commission has proposed its first major overhaul of transfer-agent rules in more than four decades, seeking to modernize a regulatory framework designed for paper certificates and manual processing as blockchain recordkeeping and tokenized securities enter mainstream US markets.
The proposed rule, published September 1, updates requirements that the SEC said mostly date from the late 1970s and early 1980s, when investors commonly held physical share certificates and firms processed ownership changes by hand. Transfer agents maintain an issuer official ownership records, register securities transfers, and monitor whether a company issues more securities than authorized. Many also process dividends, interest payments, fund redemptions, and other corporate actions across thousands of listed securities every single day.
Market participants are actively seeking to bring blockchain-native, or onchain, transfer agents into the US market, the SEC said in its proposed rule. According to the regulator, firms are developing systems for blockchain-based ownership records, tokenized fund administration, and cross-chain interoperability. Such models may require transfer agents to store shareholder information on distributed ledgers and manage processes run through smart contracts, fundamentally changing how securities ownership is tracked and verified across the financial system.
Digital Record Controls and Cybersecurity
Proposed amendments to Rule 17ad-7 would require transfer agents using electronic recordkeeping systems to install controls protecting the integrity, availability, reproducibility, redundancy, and continuity of their records. Firms could continue using current technology if their systems meet the proposed standards, giving them flexibility to adopt blockchain or other distributed systems without being locked into a specific implementation.
Records would need protection against unauthorized alteration, deletion, or destruction. Transfer agents would also have to maintain an audit trail identifying who accessed, changed, or deleted a record, along with the date and time of each action or attempted action. For regulatory examinations, firms would need systems capable of immediately producing records in both human-readable and reasonably usable electronic formats. Recovery controls would also be required for information that becomes damaged, altered, or lost during operations.
Although the proposal would apply to blockchain systems, the SEC described its approach as technology-neutral. The rules would not prescribe one type of database or require transfer agents to adopt distributed ledgers. This approach allows firms to choose between Ethereum, Solana, or other platforms while meeting the same baseline standards for data integrity and security.
Growing Registrations Signal Industry Demand
Recent registrations already demonstrate the market appetite for blockchain-native transfer agents. In August, Injective Institutional Services secured SEC transfer-agent registration, allowing the company to perform regulated functions connected to maintaining and changing securities ownership records on-chain.
Superstate registered its blockchain-based transfer agent in March 2025 to support tokenized funds, including its Short Duration US Government Securities Fund and Crypto Carry Fund. These registrations do not exempt the firms or their products from federal securities laws, but they signal growing institutional confidence that blockchain-based securities infrastructure can meet regulatory standards and serve the needs of institutional investors managing billions in assets under management.
The SEC also noted in its proposal that the existing rules do not adequately address information security, cybersecurity, disaster recovery, or the operational risks created by increasingly connected financial systems. As securities records move away from paper, these gaps become more pronounced and potentially more dangerous for investors and overall market stability.
Safeguarding and Business Continuity
Proposed changes to Rule 17ad-12 would replace requirements centered on physical certificates with a risk-management framework covering both paper and uncertificated securities. Registered transfer agents would have to adopt written policies designed to protect securities and funds from theft, loss, misuse, damage, destruction, and unauthorized access.
Client and issuer funds held by a transfer agent would need to remain in a separate bank account designated as a for the benefit of account. Under the SEC plan, separating such funds from the transfer agent operating money would reduce commingling and help keep customer assets outside the firm general estate during insolvency proceedings. Business continuity plans would be required for events that could disrupt operations, including steps for restoring records and resuming responsibilities promptly.
The proposal also introduces new standards for restrictive legends on securities, paying-agent services, and the oversight of third-party technology providers. These provisions address gaps in the current framework that become more pronounced as transfer agents adopt automated, blockchain-based systems where traditional manual controls may not apply effectively.
60-Day Comment Period and Industry Implications
Public comments on the proposed rule will remain open for 60 days after Federal Register publication. The comment period gives industry participants a chance to weigh in on the technical standards, compliance timelines, and potential costs of implementing the new requirements across their existing operations and technology stacks.
The proposal arrives at a moment of rapid growth in tokenized securities infrastructure. Dozens of firms have registered or are seeking registration with the SEC to act as transfer agents for blockchain-based securities. The regulatory clarity provided by the new framework is expected to accelerate institutional adoption of tokenized fund administration and onchain ownership records, though the compliance burden could pose challenges for smaller firms entering the market.
By establishing clear rules for digital recordkeeping, cybersecurity, and business continuity, the SEC is signaling that tokenized securities are no longer a niche experiment but a legitimate segment of the regulated US capital markets that requires a purpose-built regulatory framework. The technology-neutral approach ensures the rules remain relevant as the underlying systems continue to evolve rapidly.
discussion