Key takeaways:
- Commissioner Mark Uyeda of the SEC stated that the tokenization of assets, including securities, had potential advantages.
- Uyeda claimed tokenization streamlines transactions and lowers transaction costs by disregarding the need for middlemen.
Commissioner Mark Uyeda of the SEC stated that the tokenization of assets, including securities, had potential advantages.
On Friday, Uyeda stated that asset rights can be represented on a blockchain using digital tokens that offer “security, transparency, and immutability.”
In addition, he claimed that tokenization streamlines transactions and lowers transaction costs by doing away with the need for middlemen. Tokenization was mentioned by Uyeda as a component of more general technological developments.
“New technologies and innovations might provide further efficiencies to our global markets and investors.”
According to a 2020 Depository Trust & Clearing Corporation (DTCC) whitepaper quoted by Uyeda, as new technology dematerializes US assets, dozens of countries have abandoned using physical security certificates.
Digital and tokenized securities and distributed ledger technology (DLT) were referred to as “cutting-edge fintech innovations” in the same research.
Additionally, Uyeda admitted that beginning in November 2023, the UK FCA’s Asset Management Task Force would review the tokenization of FCA-authorized funds. He declared:
“It is important to highlight the depth of research undertaking to allow for innovation and growth while still protecting investors from harm.”
He went on to say that other regulators might take similar actions based on the FCA’s analysis and asked them to address the risks, advantages, and costs of tokenization. According to Uyeda, the opinions expressed here are his own and do not reflect those of the other SEC commissioners. They, therefore, don’t reflect the SEC’s position on the tokenization of securities.
In another instance, Nadine Chakar, managing director and worldwide head of DTCC Digital Assets, discussed the advantages of tokenization with Congress on June 5. According to her, tokenization can simplify transactions, cut expenses, and increase investor access throughout financial markets.
Chakar acknowledged the difficulties in incorporating DLT into current systems despite its advantages and pointed to the necessity of strong legal frameworks, industry-wide collaboration, and standardization.
She promoted the idea of “same activity, same risk, same regulation,” pleading with legislators to harmonize tokenization rules with current financial systems. She also demanded more research to guarantee tokenized assets’ enforceability in court and their operational resilience in insolvency.
In a similar vein, Jan van Eck, CEO of VanEck, identified regulation and liquidity as possible roadblocks to the financial industry’s tokenization progress.
The Bank for International Settlements identified tokenization and central bank digital currencies (CBDCs) as major areas of concern for the regulator in 2024. In October 2023, global consulting firm Roland Berger predicted that by 2030, the $300 billion tokenization business may grow to $10 trillion.
