- Blockchains can’t magically change the nature of traditional assets, Peirce argued.
- Many regulatory complexities for tokenised securities remain.
- Fintech apps and crypto entities are piling into tokenised stocks trading.
You can wrap equities in code, call ‘em tokenised, and stuff them into smart contracts, but in the eyes of US regulators, they’re still securities.
That’s according to SEC Commissioner Hester Peirce. In a letter released on Wednesday, she opined that slapping traditional assets onto a distributed ledger doesn’t change their legal DNA.
“As powerful as blockchain technology is,” she wrote, “it does not have the magical abilities to transform the nature of the underlying asset.”
“Tokenised securities are still securities.”
Peirce’s comments come amid the backdrop of a mini boom in tokenised equities that crypto market maker Wintermute says could be the “next major drive of onchain adoption.”
‘Still securities’
While blockchain technology might decentralise access to financial assets, it doesn’t do away with the longstanding legal framework that governs financial markets, Peirce wrote.
And if you’re trading securities, even shiny digital ones like tokenised stocks, you’re stepping onto the turf governed by the nearly century-old Securities Exchange Act.
Peirce said market participants must recognise the many complexities associated with tokenised securities, warning that tokens may fall under different regulatory buckets based on how they are structured or used.
Some tokens may represent actual ownership of the underlying security, while others could be legally distinct and qualify as restricted instruments like security-based swaps, she wrote.
Tokenised stocks goldrush
Her comments may throw some cold water on those excited about a slew of companies launching tokenised stocks services.
Most of those have, so far, been launched in Europe. Those include fintech giant Robinhood, which debuted trading for tokenised US stocks in June.
Meanwhile, crypto exchange Kraken has partnered with Backed to launch a similar offering that allows users to trade tokenised stocks, called xStocks, on the Solana and BNB blockchains.
But things are brewing Stateside, too. Coinbase has applied to the SEC for approval to let users trade tokenised stocks on its platform, while Ondo Finance has acquired Oasis Pro, an SEC-registered broker.
Although Peirce’s views aren’t official SEC policy, they could be a strong signal of how the regulator might treat tokenised equities, especially as her pro-industry stance has earned her the nickname “Crypto Mom.”
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.
