SEC Chairman Sees Tokenized Stocks in the Future

He thinks that one day all stocks could be tokenized. This comes soon after the CFTC, another monetary regulatory body in the US government, charged the derivatives platform BitMEX with illegally operating in the United States.

A Door Wide Open

On Friday, Oct. 2, the Chamber of Digital Commerce, a leading blockchain and digital asset advocacy organization, hosted a conference about the state of digital currency. During the webinar, Jay Clayton, the US SEC Chairman, said he believes blockchain’s technology could be the future of US stocks. He appears to believe in blockchain technology’s power and thinks that all stocks could eventually become tokenized. Clayton compared blockchain technology now to electronic stock trading technology 20 years ago. In the old days, you would “Call your broker, and say, ‘I want this,’” the chairman said. This is in contrast to now when:

it gets routed through an electronic algorithm and executed electronically. Just as you had stock certificates, and now you have digital entries for representing stock, it may very well be the case that those all become tokenized.

Clayton, who became SEC chairman in 2017, still raised alarms about a kind of insider trading. He said that society still has to adhere to the principle that people distributing stock or insiders must follow a certain set of responsibilities. Wary of unregulated crypto exchanges and sales, he went on to say that the technology was so promising at first that our society deemed it okay to, “toss aside some of those principles of responsibility and transparency.” He went on to further praise blockchain technology:

Now, three years, four years later, we are in a much better spot and we’re seeing the promise of blockchain technology distributed ledger technology bring efficiency to what I say is a time-tested framework.

An Internet of Finance

Though Clayton and other representatives of the US government spoke positively toward crypto technology, they seemed to contradict recent actions. Some saw the recent BitMEX charges as a cracking down on crypto exchanges, especially those that were knowingly or otherwise allowing US customers to trade against the government’s wishes. For BitMEX, this was also against company policy. Much of BitMEX’s deposits were withdrawn over the weekend and sent to other exchanges. However, Clayton’s statements do hint towards a regulated embrace of blockchain, rather than a championing or derision. Joining the talk was Brian Brooks, the acting comptroller of the currency at the Office of the Comptroller of the Currency (OCC). He supported Clayton and added that the government was not interested in a short-term future of bitcoin speculation, but a medium-term future of blockchain networks that have created, “an internet of finance.”

A Digital Dollar

Recently, the OCC allowed banks to hold custody of crypto assets. Clayton explained that the future may hold stablecoins embraced by the government and regulated by banks. This may not be the utopian, bankless future some crypto-lovers hope for. Despite recently failed attempts at crypto ETFs, the SEC Chairman even said the SEC was quite open to the idea of a blockchain-powered future:

If there was a tokenization of ETFs, we should drive that, and we’re willing to drive that. Our door is wide open if you want to show how to use or tokenize the ETF product in a way that adds efficiency. We want to meet with you. We want to facilitate that.