NEW YORK :A top U.S. securities regulator known for her supportive stance on the cryptocurrency industry said on Wednesday that new models for trading securities known as “tokenization” must still meet regulations for other securities.
Hester Peirce, a Republican commissioner on the Securities and Exchange Commission who has been nicknamed “crypto mom,” said in a statement: “As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities.”
Tokenizing equities is a process by which shares of a company are converted into a digital token, similar to how cryptocurrencies are traded. Instead of holding the securities directly, investors hold tokens that represent ownership of the securities.
Such tokens could be created by the security issuer itself, or by an entirely unrelated third party. Anyone who buys a third-party token could face unique risks, she said.
Crypto firms and others have been increasingly discussing the prospect of tokenizing securities as a new way to facilitate trading. Coinbase recently told Reuters it was seeking a U.S. green light from the SEC to offer blockchain-based stocks.
SEC Chairman Paul Atkins, also a Republican, said in a CNBC interview last week that the agency should encourage innovation when asked about the prospect of tokenizing securities.
Critics say the new technology could become a way to evade SEC oversight and expose retail investors to new risks.
