But familiar forms of market exposure, including broker-dealer securities, ETFs, depositary receipts, structured notes and other equity-related instruments, are well-established parts of the market today. Tokenization alone does not make them more or less legitimate. Their economic and legal structures should dictate their legislative treatment.
The third model is issuer-sponsored tokenization. A company and its transfer agent support tokenized ownership directly. This may be the right model for many issuers. It can connect tokenized records to shareholder systems and support familiar processes for corporate actions, registration and communication.
Securities, depository receipts, structured notes and direct registration all exist in the market today. They do not confer identical rights. Investors choose among them because they serve different needs. The important questions are whether the structure is clear, the risks are disclosed, the support is real where promised and the product does what it says it does.
It is also the right standard for tokenized markets.
A wrong outcome of the current tokenization debate would be a market where products borrow the language of stocks without telling investors what they actually have, or completely mislead investors. That would hurt investors and undermine confidence in the technology.
Another wrong outcome would be a market where tokenization turns into a set of private walled gardens. It would convert a promising new technology into a tool that narrows competition before the market has had a chance to learn what works.
