Today the House Financial Services Committee is holding a hearing on tokenization and is introducing a draft bill that would allow most types of intermediaries to use blockchains for record-keeping. The bill lists intermediaries including brokers, dealers, transfer agents, national securities exchanges, investment advisers and investment companies. While the SEC has already clarified the situation for transfer agents, questions remain for others. The measure would prevent a future administration from rolling back related SEC rules.
A separate short bill requests a report by the SEC and CFTC into how market infrastructure needs to evolve to support tokenization. Industry participants submitted written testimony in advance of the hearing, including the DTCC and Nasdaq, which have received SEC no-action letters relating to tokenization. A key point in these testimonies is that blockchain might drive more interest in direct stock issuance models, where the issuer controls the records via its transfer agent, versus the indirect entitlement model that currently dominates US equities. In that model, stocks are held in custody by the DTC’s Cede & Co and tokens in this model are digital representations of those entitlements.
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