Amid the growing political backdrop of securities tokenization, the House Financial Services Committee gathered views on the innovation during a hearing Wednesday, although the specter of President Donald Trump’s family crypto ties loomed more than once.
Lawmakers largely agreed that tokenized securities generally require the same regulatory guardrails as traditional securities trading, consistent with the position of U.S. Securities and Exchange Commission Chairman Paul Atkins, who said his agency was close to issuing a formal rule proposal to move forward on such crypto policies.
“We are on the threshold of a significant transformation of our financial landscape,” said committee Chairman French Hill. But as tokenization emerges, regulatory gaps and risks need to be explored, he said. “We’re obviously going to maintain the integrity of the market, whatever technology we select.”
Both sides have questions about oversight and how tokenization will integrate with traditional markets, which regulators and potentially crypto legislation have yet to answer. Concerns raised by Democrats on the panels included anonymous wallets that could mask foreign ownership, know-your-customer issues, and the management of decentralized finance (DeFi). But the audience did recognize the advent of technology as an inevitability rather than a theoretical future.
Democratic Rep. Maxine Waters of California, a committee member, said she was concerned about tokenization moving more toward the gamification of trading.
“This committee has already looked at how trading apps use behavioral designs to turn investing into gambling,” she said. “Tokenization could make these transactions faster, always-on and with fewer guardrails.”
However, speed and efficiency are the fundamental advantage of stock tokenization. Summer Mersinger, CEO of the Blockchain Association, suggested that non-custodial, non-discretionary DeFi code brings efficiencies because “you remove a lot of middlemen that add expenses to commerce.”
“Regulatory approaches should clearly distinguish between entities that perform intermediary functions and infrastructures that enable user-directed activities, ensuring that obligations are calibrated based on custody, control and discretion,” she said in her testimony. Mersinger also encouraged an “iterative approach” by the SEC to rapidly advance tokenization policy.
As the Senate attempts to complete the Digital Asset Market Clarity Act that will establish laws to govern such tokenization, Atkins said his agency will provide an “innovation exemption” that would allow companies to test new areas such as tokenization without immediate registration requirements. Even before all this happens, the crypto industry and broader financial sector are building tokenization platforms.
“Tokenization is just the next iteration of technology,” said Ken Bentsen, who heads the Securities Industry and Financial Markets Association. He said new entrants should benefit from the same regulations and safeguards as companies currently involved in stock trading.
Just this week, Larry Fink, Chairman and CEO of BlackRock, asserted in his annual letter to shareholders that digital assets and tokenization could “update the plumbing of the financial system.” News also emerged that investment giant Franklin Templeton had entered into a tokenization partnership with Ondo Finance and that $2.2 trillion asset manager Invesco had taken over management of Superstate’s $900 million tokenized US Treasury bond fund, USTB.
But Democrats on the committee also criticized the Trump administration’s push for the crypto sector, which Waters said is associated with “blatant corruption” involving the Trump family’s personal involvement in digital asset businesses, which includes a stake in World Liberty Financial Inc. which announced a deal with Securitize last month to tokenize loan income tied to hotel projects.
“The Trump family made an estimated $1 billion in profit from their crypto projects,” Waters noted. “When government officials who approve the rules also profit from the market they would regulate, the American people rightly question whose interests really come first.”
“The ties between the Trump family and this industry have unfortunately created doubt about the legitimacy of moving forward on this important market structure legislation,” said Salman Banaei, general counsel at tokenization firm Plume, who has also worked at the SEC and the Commodity Futures Trading Commission.
