Crypto players eye more tokenization tests after latest SEC talk

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.

A day after the SEC’s tokenization-focused roundtable, an asset manager launched its first tokenized fund. We just saw stablecoin-related M&A, too.

First, SEC Chair Paul Atkins reiterated Monday that SEC policymaking “will no longer result from ad hoc enforcement actions.” (Yes, the agency italicized “ad hoc” in the transcript.)

On tokenization, he likened securities moving onchain to the transition of audio recordings from vinyl records to cassette tapes to digital software.

“Blockchain technology holds the promise to allow for a broad swath of novel use cases for securities, fostering new kinds of market activities that many of the commission’s legacy rules and regulations do not contemplate today,” Atkins said.

But SEC Commissioner Caroline Crenshaw — not exactly known for her crypto support — essentially told everyone to proceed with caution.

She questioned how great instant settlement actually is, noting the delay between trade execution and settlement provides for “core market functionalities and protection mechanisms.”

Newsletter

Subscribe to Forward Guidance Newsletter

Crenshaw also asked why the SEC — a “tech-neutral regulator” — would focus on blockchain over other types of distributed ledger technologies?

“And we seem to be doing so before the technology has even been demonstrated as fit for purpose,” she added.

On that point, Crenshaw’s colleague Hester Peirce last week noted the SEC crypto task force is considering an exemptive order to let firms issue, trade and settle eligible tokenized securities. So-called sandboxes “can help regulators think about how existing rules could be adapted to accommodate trading tokenized securities at scale,” Peirce explained.

Franklin Templeton’s Sandy Kaul urged “practical sandboxes” that don’t just test what the tech can do (we know that already) — but that inform legislation/regulations. She stressed too that “consumer opportunity” is as important as consumer protection.

Kaul joined execs from BlackRock, Nasdaq, Fidelity and others. A second panel included some smaller, DeFi-centric players.

Philipp Pieper, co-founder of RWA protocol Swarm, said in an email that while the SEC’s engagement with TradFi titans validates this segment’s potential, DeFi founders must advocate for permissionless protocols and programmable assets to ensure regulations don’t sideline startups.

“We must prove RWAs’ value with tangible use cases, such as fractional ownership and liquid supply chain assets, to win over regulators and users,” Pieper said. “The sector must build compelling RWA platforms which demonstrate clear cost savings and liquidity solutions.”

Anchorage, VanEck making moves

Anchorage Digital CEO Nathan McCauley (after the news his company would buy Mountain Protocol) said: “Stablecoins are becoming the backbone of the digital economy.”

If stablecoins (with a $230 billion market cap) are like checking accounts (as Tokenized Asset Coalition executive director Johnny Reinsch put it during the roundtable), yield-bearing tokenized money market funds are like savings accounts.

Speaking of which, VanEck is the latest to offer onchain access to US Treasury-backed assets via its new VBILL fund. Available across the Avalanche, BNB Chain, Ethereum, and Solana blockchains, VBILL facilitates atomic liquidity via Agora’s USD stablecoin (AUSD).

BlackRock’s BUIDL is perhaps the best known tokenized yield fund now. Its assets under management (as you see above) make up roughly 40% of the nearly $7 billion tokenized Treasury space, rwa.xyz data shows.

Then there’s the opportunity to tokenize public stocks, as well as private equities and credit.

Though stablecoin bill progress has hit a snag in the US, these ongoing SEC talks — even if not Earth-shattering — signal the industry is getting closer to clarity.

Get the news in your inbox. Explore Blockworks newsletters: