Tokenized securities are still securities – SEC Peirce’s warning!
Bitwise CIO projects that tokenized market could grow 4000x and can be maximized in these ways...
Key Takeaways
- SEC Commissioner Peirce warned tokenized stock issuers to follow securities law. Matt Hougan urged investors to consider crypto stocks or L1 tokens like ETH, SOL, XRP, LINK, etc, to gain exposure to the projected tokenized market boom.
The tokenized stocks narrative, being able to trade equities on-chain, anywhere, continues to grab attention and different views.
U.S. SEC Commissioner Hester Peirce is the latest to add her voice on the topic.
In a statement on the 9th July, Peirce acknowledged the remarkable impact of tokenized equities, but warned that the products and issuers must still follow federal securities regulations.
She stated,
“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities.”
Giving an example, she added that token buyers may be exposed to counterparty risks if they buy a tokenized equity from unaffiliated third-party issuers who hold custody of the underlying asset.
In such a scenario, distributors of tokenized tokens must consider disclosure obligations, Peirce wrote.
How to ride the tokenized market wave
The topic gained traction in July after Robinhood launched several tokenized U.S. equities for E.U. users.
In fact, the trading platform issued even tokenized stocks of private firms like OpenAI and SpaceX, which both OpenAI and Elon Musk termed as ‘fake equity.’
In response, Vlad Tenev, CEO of Robinhood, said that they aren’t ‘technically equity’ but offer retail investors exposure to private stocks.
Another player, Backed Finance, rolled out xStocks, bringing tokenized stocks and ETFs across the Solana [SOL] ecosystem and exchanges like Kraken, Bybit, and Gate.
From Tenev’s argument, on-chain stocks, in their current form, can be viewed as derivative contracts tracking the prices of the underlying asset without necessarily owning the asset.
Pairing these recent updates and the agency’s stance, Bloomberg ETF analyst James Seyffart summed up Peirce’s statement as a ‘warning’ to Robinhood, Backed, and similar players.
Meanwhile, critics see no sense in tokenized stocks, arguing that adoption could take longer.
This is true for the U.S. and users in developed countries with proper access to capital markets, but some regions don’t enjoy similar and efficient access.
Bitwise CEO Matt Hougan stated that despite the projected slow adoption, even a fraction of capital market flows going through blockchain rails is enough to boost these networks.
Hougan added that the tokenized market could grow 4000x in the coming years. As a result, the best way to gain exposure is through L1 tokens or crypto stocks like Robinhood, Coinbase, Circle, etc.
“The cleanest way to invest in the rise of tokenization is to buy a basket of the top Layer 1 blockchains and infrastructure plays: Ethereum, Solana, XRP, Chainlink, etc.”
