But familiar forms of market exposure, including brokerage-held securities, ETFs, depository receipts, structured notes and other equity-linked instruments, are well-established parts of today’s market. Tokenization alone does not make them more or less legitimate. Their economic and legal structures should dictate their regulatory treatment.
The third model is issuer-sponsored tokenization. A company and its transfer agent directly support the tokenized property. This may be the right model for many issuers. It can connect tokenized records to shareholder systems and support familiar processes for corporate actions, record keeping, and communications.
In today’s market, brokerage-held securities, depositary receipts, structured notes, and direct registration coexist. They do not provide identical rights. Investors choose between them because they satisfy different needs. The important questions are whether the structure is clear, the risks are disclosed, the support is real when promised, and the product does what it says it does.
That is also the correct standard for tokenized markets.
A flawed outcome of the current tokenization debate would be a market in which products borrow the language of stocks without telling investors what they really have or misleading them entirely. That would hurt investors and undermine confidence in the technology.
Another wrong outcome would be a market where tokenization becomes a set of private walled gardens. That would turn a promising new technology into a tool that would reduce competition before the market has had a chance to learn what works.
