Tokenisation Leaders Push Back on Coinbase’s Claim That Crypto Bill “Bans” Tokenised Stocks

Yesterday, Coinbase withdrew its support for the US Senate’s draft crypto market structure bill citing — among other things — that it would lead to a “de facto ban on tokenised securities.” 

Coinbase’s decision to oppose the draft bill led to a postponement of the Senate Banking Committee’s markup session scheduled for today and has cast doubt over whether an amended version of the bill will pass at all before the crucial US mid-term elections due to be held later this year.

Now, several leaders at firms on the forefront of securities tokenisation have spoken out against Coinbase’s move, arguing that far from banning the tokenisation of securities, the draft bill simply sought to clarify that they’d be subject to the same kinds of regulation as traditional securities.

Speaking to CoinDesk, Carlos Domingo, CEO of Securitize, said that “the current draft does not kill tokenized equities.” Domingo argued that the bill simply affirmed that tokenised equities, despite being tokenised, remain equities and must follow the same rules. It’s a clarification that he believes is crucial if blockchain tech is to be fully integrated into TradFi.

Gabe Otte, co-founder and CEO of asset tokenisation company Dinari, said his firm doesn’t “interpret the CLARITY draft as a ‘de facto ban’ on tokenized equities.” 

What it does do is reaffirm that tokenized equities remain securities and should operate within existing securities laws and investor protection standards.

Gabe Otte, co-founder and CEO, Dinari

Alexander Zozos, general counsel at the asset management and tokenisation firm Superstate, told CoinDesk that the draft bill wasn’t so much about cracking down on tokenised securities — which already fall under the purview of the Securities and Exchange Commission — but about creating clarity around digital assets that currently sit in a regulatory grey area.

“The SEC is already on the case [of regulating tokenised securities],” Zozos said, referring to the regulator’s ‘Project Crypto’ program led by Chairman Paul Atkins. He added that he believes the SEC “will continue to provide that clarity even absent further legislative directives.”

Zozos argued that the delay in passing the market structure bill caused by Coinbase’s opposition is likely to harm companies working with assets that aren’t classed as securities sitting in a regulatory no man’s land, not those working with tokenised securities.

Related: Coinbase Breaks With Senate Crypto Bill as Banking Committee Heads to Showdown

Tokenisation Will Continue With or Without Legislation, Says Industry Insider

According to Will Beeson, the CEO of Uniform Labs, tokenisation’s growth is set to continue regardless of the progress of legislation in the US. Beeson said that “even without immediate legislative resolution, the push toward regulated, liquid tokenized assets continues.” 

Institutions care less about headlines and more about whether tokenized securities can be moved, redeemed and reused seamlessly within financial workflows.

Will Beeson, the CEO of Uniform Labs

The continued growth of tokenisation could revolutionise global financial markets, with the potential for virtually all assets to move on-chain, including funds, bonds and real estate in addition to securities and stablecoins. 

Already, the stablecoin market cap is over US$300 billion (AU$447b), and according to Bitwise CIO Matt Hougan, we could see as much as 1-5% of the US$257 trillion (AU$383t) US stock and bond markets tokenised in the “short term”, dwarfing the market cap of any other digital assets, including Bitcoin. 

Related: Tokenisation’s Reality Check: Do Stocks Matter More Than Crypto?

In the long term — maybe 10 to 20 years — Hougan believes we’ll likely see the entirety of the US stock and bond markets fully tokenised, along with most other asset classes.

Given the potentially revolutionary impact of tokenisation, it’s not surprising we’ve seen TradFi giants including BlackRock, Franklin Templeton, Fidelity and others either launch or back tokenised funds.

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