Executives from across the cryptocurrency industry appeared before the US House of Representatives Committee on Financial Services on Wednesday, arguing that existing investor protection and financial surveillance regulations should extend to tokenized securities. The hearing was convened as lawmakers examine the Capital Markets Technology Modernization Act of 2026 and weigh the broader effects of asset tokenization on capital markets. Committee chairman Representative French Hill framed the session around the need to balance technological innovation with investor protection and market integrity.
Tokenized real-world assets, known as RWAs, are traditional financial instruments represented by tokens on blockchain networks. Summer Mersinger, chief executive of crypto advocacy group Blockchain Association, told the committee that tokenization reduces transaction costs and settlement times by replacing error-prone manual record-keeping with transparent, timestamped entries on a blockchain. She argued the technology has the potential to fundamentally reshape US financial markets. Mersinger and fellow witnesses agreed that existing securities laws already apply to tokenized instruments.
Witnesses maintained that the underlying technology used to record securities transactions does not alter the fundamental principles of investor protection or jurisdictional oversight. Supporters of RWA tokenization contend the approach removes intermediaries from the clearing and settlement process, improving what they describe as capital velocity through near-instant settlement. The panel broadly supported applying current legal frameworks to these new instruments rather than creating an entirely separate regulatory structure.
Lawmakers pressed witnesses on how tokenized asset platforms could enforce know-your-customer checks, anti-money laundering provisions, and sanctions compliance. Illinois Representative Bill Foster raised concerns about whether tokenized assets would operate on private, permissioned blockchains or on public blockchains that often permit anonymous participation through self-hosted wallets. The question highlighted a central tension between the open architecture of many blockchain networks and the identification requirements demanded by financial regulators.
John Zecca, executive vice president and global chief legal, risk, and regulatory officer at Nasdaq, told Foster that the exchange is able to collect know-your-customer information at the protocol level because its system operates on a permissioned blockchain network. Christian Sabella, managing director and deputy general counsel of the Depository Trust and Clearing Corporation, the world’s largest clearinghouse, said identifying information could also be embedded directly at the token level. Sabella noted that such identifiers would be immutable and would persist whether the token was traded on a permissioned or permissionless network.
Salman Banaei, general counsel for Plume Network, a permissionless blockchain focused on RWAs, said his network embeds anti-money laundering and sanctions compliance checks at the token level, enabling tokens to be frozen when necessary. However, Banaei acknowledged to Foster that government regulators do not yet have a technological solution capable of identifying wash trades or confirming the identity of market participants with complete certainty. That admission underscored the regulatory gaps that remain even as the industry proposes technical workarounds to compliance challenges.
The hearing reflects growing congressional interest in how blockchain-based financial instruments should be governed as tokenization moves closer to mainstream adoption. Legislators are weighing whether current legal frameworks are sufficient or whether new rules are needed to address the specific characteristics of tokenized markets. The outcome of deliberations over the Capital Markets Technology Modernization Act of 2026 is expected to shape the regulatory environment for tokenized assets in the United States.
Originally reported by CoinTelegraph.
