The Securities and Exchange Commission (SEC) is reportedly developing a plan to allow versions of blockchain-registered stocks to trade on cryptocurrency exchanges.
The proposal is still in the early stages, allowing investors to buy and sell stock tokens (digital representations of stocks in stock trading companies) on approved crypto platforms.
The initiative reflects the increasing openness of regulations on tokenization, the process of creating blockchain-based tokens that reflect ownership of traditional assets.
SEC Chair Paul Atkins recently described tokenization as “innovation.” Agents should try to move forward, not limiting. Regulators should “focus on how market innovation is carried out,” he said, saying tokenized assets can improve access to financial markets and reduce costs.
Interest in stock tokenization has been accelerating in recent months. Platforms such as Robinhood and Kraken have begun offering tokenized stock products. At the same time, NASDAQ requested SEC approval for the rules change that would allow the exchange to list tokenized securities.
Crypto Exchange Coinbase is reportedly seeking SEC approval to provide tokenized stock.
Still, the SEC’s apparent willingness to embrace blockchain-based stocks has drawn pushbacks from traditional financial companies. In a July memo to the agency’s Cryptographic Task Force, Citadel Securities warned regulators to ensure that regulators do not misuse the regulatory gap, but provide true market benefits.
“Tokenized securities must achieve success by providing real innovation and efficiency to market participants rather than selfish regulatory arbitration,” Citadel writes.
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Stock tokenization will earn you the ground
Tokenized stocks have emerged as one of the next major growth areas within the broader tokenization market. Early fiscal tokenization efforts focus primarily on private credit and the US Treasury, but stocks are beginning to catch up.
Industry data shows that over $31 billion in assets have been tokenized, but tokenized stocks currently account for only about 2% of that total. Still, their value has almost doubled over the past 100 days, and adoption has accelerated.
A recent Binance research report compared the rise in tokenized stocks with the early days of Defi Boom in 2020 and 2021. Researchers suggested that tokenized stocks “may be approaching a major inflection point of a broader transition to hybrid finance,” following recent growth.
Binance Research estimates that the market for tokenized stocks could exceed $1.3 trillion if only 1% of global stocks move to blockchain.
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