CTF Written Submission

Strategic Enhancement Addendum: Tokenized Municipal Instruments Under Distributed Ledger Technology

Dec. 4, 2025
  • The framework establishes a qualified custody architecture using FIPS 140-3 Level 3 Hardware Security Modules (HSMs) and “Good Control Locations,” aligning with the SEC’s May 2025 guidance to ensure broker-dealer possession and control of tokenized municipal securities.
  • Tokenized municipal securities are treated as “financial assets” in “securities accounts” under UCC Article 8, providing bankruptcy priority, security interest perfection through control, and enforceable entitlement rights, even where SIPA coverage may not apply.
  • A legally binding one-to-one mapping between blockchain tokens and standard CUSIP identifiers ensures universal legacy compatibility, enabling seamless conversion to traditional DTCC book-entry form and eliminating stranded asset risk.

Last Reviewed or Updated: Dec. 5, 2025