But familiar forms of market exposure, including broker-dealer-held securities, ETFs, foreign depositary receipts, structured notes and other equity-linked instruments, are now well-established parts of the 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 assume token ownership. This may be the right model for many transmitters. It can connect tokenized records to shareholder systems and support familiar processes for corporate actions, recordkeeping and communications.
Brokered securities, foreign depositary receipts, structured notes, and direct registration all coexist in today’s market. They do not grant identical rights. Investors choose among them because they meet different needs. The important questions are whether the structure is clear, the risks are disclosed, the support is real where it is promised, and the product does what it claims to do.
This is also the right standard for tokenized markets.
One of the erroneous outcomes of the current tokenization debate would be a market in which products borrow the language of stocks without telling investors what they actually hold, or completely misleading them. This would harm investors and undermine confidence in the technology.
Another erroneous outcome would be a market where tokenization becomes a set of walled private gardens. This would turn a promising new technology into a tool that restricts competition before the market has a chance to learn what works.
