The US Securities and Exchange Commission (SEC) is reportedly formulating a strategy to permit blockchain-registered stock trades on cryptocurrency exchanges — a significant advancement toward integrating digital asset technology into the conventional financial system.
The proposal, still in its preliminary phases, would allow investors to purchase and sell stock tokens — digital representations of shares in publicly traded companies — on authorized crypto platforms, as reported by The Information Tuesday, citing sources familiar with the situation.
This initiative showcases an increasing regulatory openness towards tokenization, the process of generating blockchain-based tokens that reflect ownership of traditional assets.
SEC Chair Paul Atkins recently articulated that tokenization should be viewed as an “innovation” that the agency should strive to promote rather than inhibit. Regulators “ought to concentrate on how to advance innovation in the marketplace,” he remarked, emphasizing that tokenized assets could enhance accessibility to financial markets and lower costs.
Interest in stock tokenization has surged in the past months. Platforms like Robinhood and Kraken have started to offer tokenized stock products, while Nasdaq has sought SEC approval for a rule change to list tokenized securities on its exchange.
Additionally, crypto exchange Coinbase is reportedly looking to secure SEC approval to provide tokenized equities.
However, the SEC’s willingness to embrace blockchain-based equities has faced resistance from traditional finance firms. In a July correspondence to the agency’s Crypto Task Force, Citadel Securities urged regulators to ensure tokenization benefits the market rather than exploiting regulatory loopholes.
“Tokenized securities must succeed by offering real innovation and efficiency to market participants, not through self-serving regulatory arbitrage,” Citadel emphasized.
Magazine: Can Robinhood or Kraken’s tokenized stocks ever be truly decentralized?
Stock tokenization gains ground
Tokenized stocks are emerging as a key growth area within the broader tokenization landscape. While initial financial tokenization efforts predominantly targeted private credit and US Treasury bonds, stocks are now rapidly catching up.
Industry data indicates that over $31 billion in assets have been tokenized, yet tokenized equities represent only about 2% of that sum. Nevertheless, their value has nearly doubled in the past 100 days, indicating accelerating adoption.
A recent report from Binance Research likened the growth of tokenized stocks to the early days of the DeFi boom in 2020 and 2021. Researchers suggested that, given recent advancements, tokenized equities “might be approaching a significant inflection point in the overall shift to hybrid finance.”
Binance Research estimates that the market for tokenized stocks could surpass $1.3 trillion if just 1% of global equities transition to the blockchain.
Magazine: Robinhood’s tokenized stocks have stirred up a legal hornet’s nest
