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Tokenized stocks and private equity may encounter numerous legal obstacles, as the emerging real-world asset (RWA) exists in an ambiguous area that does not confer the same legal privileges to holders as traditional asset proprietors, according to industry professionals and legal experts.
In correspondence with Cointelegraph, John Murillo, chief business officer of fintech enterprise B2BROKER, stated that investors ought to grasp the fundamental characteristics of any potential tokenized equity instruments, including any dividend distributions, profit-sharing agreements, or whether the tokenized RWAs solely offer capital appreciation to the holder. The executive remarked:
“It is essential to recognize that investors do not possess actual shares; they hold tokens issued by intermediaries, which may grant them payments if the underlying shares rise in value or are sold.”
“There is no direct claim on corporate assets, no voting privileges, and no access to internal financial data,” Murillo continued.
This significant distinction became more pronounced after the mixed-asset trading platform Robinhood revealed plans to offer OpenAI and SpaceX “private equity” tokens to European users, causing OpenAI to clarify that the tokens are not equity in the firm.
“I think it’s fair to anticipate that incidents like the ‘OpenAI Token’ situation will happen again, where retail investors are marketed tokenized securities in a manner that leads to significant confusion,” attorney Tyler Yagman of the Ferraro law firm stated to Cointelegraph.
Notwithstanding the confusion, tokenized equities present a “persuasive” use case, which “integrate various functions of a securities marketplace into a unified technology,” Yagman added.
The attorney advocated for clear and comprehensive regulations for tokenized equity instruments, which “democratize” access to previously unreachable asset classes.
Related: TradFi body urges SEC to deny special treatment for tokenized stocks
Crypto firms advocate for tokenized equities trading in the US to a welcoming SEC
Robinhood is not the sole brokerage exploring tokenized equities trading; the platform is part of an expanding roster of crypto giant firms actively lobbying for tokenized stock trading or already providing those services.
Tokenized stock trading is already operational on crypto exchanges Kraken and Bybit, with over 60 publicly traded companies available for trading across both platforms.
Centrifuge, a blockchain platform that incorporates RWAs into decentralized finance (DeFi) applications, announced a collaboration with the S&P Dow Jones Indices to tokenize the S&P 500 stock market index.
Crypto exchange powerhouse Coinbase is reportedly seeking approval from the United States Securities and Exchange Commission (SEC) to offer tokenized stock trading to its clientele.
The US SEC, under the direction of chairman Paul Atkins, is reportedly receptive to industry proposals advocating for tokenized financial assets.
“Tokenization is a breakthrough. And we at the SEC should prioritize advancing innovation in the marketplace,” Atkins remarked to CNBC on Wednesday.
Magazine: TradFi is constructing Ethereum L2s to tokenize trillions in RWAs: Inside story
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