The US Securities and Exchange Commission (SEC) is currently formulating a proposal that could empower the trading of blockchain-based versions of publicly traded stocks on cryptocurrency exchanges. Should this initiative gain approval, it represents a significant step towards bridging the gap between traditional equities and the burgeoning digital asset ecosystem, which have historically functioned in isolation from each other.
As reported by The Information, this initiative is still in its nascent stages. It aims to enable investors to trade stock tokens—digital counterparts of corporate shares—on accredited cryptocurrency trading platforms. These tokens replicate the ownership rights associated with traditional shares but leverage blockchain technology instead of conventional clearing systems.
This initiative underscores the increasing regulatory focus on tokenisation, which employs blockchain technology to represent ownership of tangible assets. SEC Chair Paul Atkins recently characterized tokenisation as an “innovative” development that regulators ought to endorse rather than restrict. He posited that responsibly developed tokenised assets could significantly reduce costs and broaden access to financial markets.
Heightening Momentum for Stock Tokenisation
There is a rapidly growing momentum for tokenised stocks, with trading platforms like Robinhood and Kraken introducing tokenised equity products to meet the surging demand within the cryptocurrency market. Moreover, Nasdaq has approached the SEC for the approval of a rule modification that would authorize it to list tokenised securities. At the same time, Coinbase is pursuing permission to provide similar functionalities on its cryptocurrency exchange.
Tokenisation is already reshaping various sectors within finance—from private credit to US Treasuries. Equities are now emerging as a pivotal category in this evolution. Industry reports indicate that over $31 billion in assets have already been tokenised, although equities currently account for merely about 2% of that figure. Nevertheless, the valuation of tokenised equities has nearly doubled within the last 100 days, signaling a rapid increase in adoption.
A recent report from Binance Research likened the surge in tokenised equities to the early phases of the DeFi boom seen in 2020 and 2021. Researchers hypothesized that tokenised equities might soon reach a critical tipping point as traditional finance converges with blockchain technology. They estimate that if just 1% of global equities were to be tokenised, the market value could surpass $1.3 trillion.
Traditional Finance Expresses Caution
However, not everyone in the financial sector is entirely aboard with these developments. Established firms have advised regulators to approach this transformation with caution. Citadel Securities, for instance, cautioned in a letter to the SEC’s Cryptocurrency Task Force in July that the success of tokenised stocks should be grounded in delivering genuine advantages rather than using loopholes in existing regulations.
“Tokenised securities must flourish by providing real innovation and efficiency to market participants, instead of relying on self-serving regulatory arbitrage,” the firm asserted.
Although the SEC has yet to disclose a timeline for its proposal, if it proceeds, it could signify one of the agency’s most definitive moves toward integrating blockchain technology with regulated financial markets.
See also: A survey identifying the leading cryptocurrency nations
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