Cryptocurrency Pioneer Peirce: SEC Welcomes Innovation in Asset Tokenization, but Businesses Must Ensure Adequate Disclosure
Hester Peirce, Known as “Crypto Mom,” States Market Will Ultimately Determine Success of Asset Tokenization
Hester Peirce, a commissioner of the U.S. Securities and Exchange Commission (SEC), stated during an interview on the morning of August 13 that different models of asset tokenization will ultimately be tested by the market for their success or failure. She added that as long as tokenization operators provide sufficient information disclosure to clearly inform investors about the characteristics of the assets, the SEC would be willing to cooperate with relevant operators.
Operators Should Ensure Adequate Information Disclosure While Exploring Various Tokenization Models
Peirce indicated that the SEC maintains an open attitude towards various methods of asset tokenization and is willing to collaborate with operators implementing different approaches to see which models the market will embrace.
However, Peirce also reminded that companies must fully disclose the nature of the assets when promoting tokenization.
What Are Tokenized Securities and Are They Subject to Securities Laws?
Tokenized Securities are “digital versions of securities” issued on a blockchain, which can be traded directly on the chain without the need for traditional brokerage accounts. However, such tokens typically do not represent direct ownership of the underlying asset.
The advantage of tokenized securities is that they can “break down” a stock or other asset into smaller units, allowing retail investors to enter the market with smaller amounts of capital. Additionally, on-chain transactions have the characteristic of being available for trading 24/7, unlike traditional stock markets which have opening and closing hours.
According to previous reports, Peirce has stated that tokenized securities, whether issued directly by companies or launched by third parties, must comply with traditional securities laws as long as their nature remains that of a security.
Industry Opinions Diverge, Ranging from Active Promotion to Cautious Observation
Currently, Robinhood, a U.S. brokerage firm, is one of the most proactive operators in promoting tokenization, having announced earlier this year that it would allow some European users to start trading “tokens representing U.S. stocks.” Robinhood’s CEO, Vlad Tenev, later indicated that this business is under discussion with regulatory authorities.
Despite some operators being optimistic about promotion, others remain cautious. For instance, Citadel Securities, the largest designated market maker on the New York Stock Exchange, has warned about potential “regulatory arbitrage” arising from tokenization. They believe that until the SEC establishes clear regulations, operators may exploit loopholes.
JPMorgan also stated that while the concept of tokenization is currently quite popular, actual adoption remains limited. According to JPMorgan’s own analysts, the global tokenization market size is currently only about $25 billion, with most initiatives driven by crypto operators, while traditional banks, brokerages, and publicly listed companies have significantly lower levels of participation.
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