On-Chain And Enforceable: The SCA's Tokenization Framework

KEY TAKEAWAYS

• The regulation applies strictly to tokenised securities and derivatives, excluding most virtual assets and real-world assets (RWAs) unless structured as securities.
• Token rights must be formally recorded and exercised on a distributed ledger technology (DLT) under a Registration Agreement, making enforceability dependent on on-chain recognition.
• A clear differentiation between permissioned and permissionless DLT systems assigns liability based on the issuer's level of control over the blockchain infrastructure.
• Over-the-counter (OTC) trading is allowed but restricted to licensed custodial wallets or pre-approved self-custodial wallets, ensuring compliance with AML/CFT standards.