SEC Commissioner Mark Uyeda acknowledged that tokenization of assets, including tokenization of securities, has potential benefits.
Uyeda said on June 14 that representing asset rights with a digital token on a blockchain can provide “security, transparency and immutability.”
Additionally, he said tokenization removes the need for intermediaries, streamlining transactions and reducing transaction costs.
Citing tokenization as part of broader technological advancements, Uyeda stated:
“New technologies and innovations can bring even greater efficiencies to our global markets and investors.”
Uyeda cited a 2020 Depository Trust & Clearing Corporation (DTCC) white paper indicating that dozens of countries have stopped using physical securities certificates as they adopt new technology that dematerializes U.S. securities.
The same report described distributed ledger technology (DLT) and digital and tokenized securities as “cutting-edge fintech innovations.”
FCA assesses tokenization
Uyeda also acknowledged that the UK FCA’s Asset Management Task Force began assessing the tokenization of FCA-authorized funds from November 2023. He said:
“It is important to emphasize the depth of the research [the FCA is] company to enable innovation and growth while protecting investors from harm.”
He added that the FCA’s assessment could inform moves by other regulators and urged regulators to address the costs, benefits and risks of tokenization.
Uyeda said his statements are his individual views, and not those of his fellow SEC commissioners. As such, they do not represent the SEC’s position on security tokenization.
DTCC praises benefits
Elsewhere, Nadine Chakar, global head and managing director of DTCC Digital Assets, described the benefits of tokenization to Congress on June 5. She said tokenization has the potential to streamline transactions, reduce costs and broaden investors’ access to financial markets.
However, despite the benefits, Chakar acknowledged challenges in integrating DLT into existing systems, citing the need for industry-wide coordination, standardization and robust regulatory frameworks. She urged lawmakers to align tokenization rules with existing financial frameworks, advocating the principle of “same activity, same risk, same regulation.”
In addition, she called for further research to ensure the legal enforceability of tokenized assets and operational resilience under insolvency regimes.
Similarly, Jan van Eck, CEO of VanEck, described liquidity and regulation as potential obstacles to the progress of tokenization in the financial sector.
Meanwhile, the Bank for International Settlements recently announced that tokenization and central bank digital currencies (CBDCs) will be a key area of focus for the regulator in 2024.
Global consultancy Roland Berger said in October 2023 that the tokenization market, worth $300 billion, could reach $10 trillion by 2030.