Tokenized Real-World Assets (RWA): Security Laws & Reg D/Reg S Compliance
The Executive Verdict
1. The Core Definition: The Howey Test Verdict
Applying Howey: If you market "Resale Value" or "Yield," the SEC will disregard any "Membership Club" labels. It is a security.
Gavel striking Blockchain Block. Shards "Utility" fly away, revealing solid core "Security".
2. The Exemption Framework: Reg D (506c) vs. Reg S
Reg D 506(c): US Accredited Investors Only (> $1M net worth). General Solicitation OK. Strict 3rd Party Verification required. Reg S: International Non-US persons only. 1 year lock-up for flowback.
| Feature | Reg D (506c) | Reg S | Reg A+ (Tier 2) |
|---|---|---|---|
| Target Audience | US Accredited Investors | Int'l Investors | Retail (Non-Accredited) |
| Capital Limit | Unlimited | Unlimited | $75 Million / Year |
| Solicitation | Public OK | Public OK (Excl. US) | Public OK |
| Verification | Strict 3rd Party | KYC/AML + Geo-Block | SEC Qualification |
3. Operational Compliance: The "Permissioned" Token Standard
Standard ERC-20s are illegal for securities (too permissionless). Use ERC-3643/1400. Logic: Smart Contract checks Identity Registry (Accredited? Whitelisted? Lock-up over?) before allowing transfer.
4. The Liquidity Illusion: Rule 144 & Secondary Markets
Rule 144: US investors must hold for 1 Year (Restricted Securities). No instant liquidity. Secondary trading must occur on SEC-registered ATS (tZERO, Oasis Pro), not Uniswap.
Holding Cell with "365 Days" clock. Outside: Bustling "Secondary Market" that is inaccessible.
5. Structuring the Asset: The SPV Model
Tokenize the LLC (SPV), not the House. The Operating Agreement must have a "Hard Link" clause recognizing blockchain records as presumptive ownership of Membership Interests.
6. Global Nuance: The "Flowback" Risk
Risk: Reg S investors selling to US investors before lock-up ends. Solution: Tranching. Token A (Reg D) blocks non-US. Token B (Reg S) blocks US. Merge after 1 year.
7. The Tech Stack: The Compliance Triangle
1. Tokenization Platform (Securitize - Deploys contracts). 2. KYC/AML Provider (Sumsub - Verifies identity). 3. Qualified Custodian (Anchorage - Holds unissued tokens).
8. Summary Checklist: The RWA Launchpad Audit
1. Legal Opinion (Reg D/S). 2. SPV Formation (Operating Agreement updated). 3. Code Audit (Transfer Restrictions). 4. Transfer Agent Appointed. 5. Bad Actor Checks.
🏗️ The Securities Structure Test
F.A.Q // Logical Clarification
Can I use an NFT to represent a house?
"Yes, but if it's fractional ownership, it's a Security. The NFT format does not avoid SEC jurisdiction."
Can I borrow against RWA tokens in DeFi?
"Only in Permissioned DeFi pools (e.g., Aave Arc) that respect the whitelist. Public Uniswap pools break compliance."
What if I lose my Private Key?
"Transfer Agent has "God Mode" to burn lost tokens and reissue new ones to your new wallet. Asset is safe."
Module ActionsCW-MA-2026
Institutional Context
"This module has been cross-referenced with Legal & Regulatory / Securities Law standards for maximum operational reliability."