Native Tokenization Gains as True On-Chain Securities Model

According to Securitize CEO Carlos Domingo, native tokenization is becoming the most legitimate way to represent securities on blockchain

ContentsSecuritize Pushes Native Tokenization ModelRegulatory Eyes on Synthetic ModelsPast Failures Signal Need for CautionHe says that the existing models do not deliver on blockchain’s main promises, risking letting investors down and diluting the transparency factor.

Domingo noted that the majority of tokenized resources roam freely in restricted platforms that resemble traditional schemes. His point was that native tokenization directly issues, records, and transfers the securities on-chain, removing intermediaries. This, he mentioned, would guarantee complete legal ownership using the blockchain itself.

Securitize Pushes Native Tokenization Model

Securitize has led the way in native tokenization. The company offers a platform on which companies can distribute shares on-chain without using conventional infrastructure. Domingo featured Exodus, a crypto software company whose shares (in the form of tokens) are legally equal to the actual stock in the blockchain.

This structure lessens counterparty risks, operational delays, and inconsistencies between off-chain and on-chain records. Another example he cited is the $2.8 billion Institutional Digital Liquidity Fund of BlackRock. Securitize, in that case, is the custodian of the share register of this fund, which is being managed entirely on Ethereum as an avatar of a transfer agent.

Regulatory Eyes on Synthetic Models

As interest in tokenization increases, US regulators have raised concerns over the use of non-native approaches. Hester Peirce, an SEC commissioner, cautioned that technology will not alter the definition of securities as set by the law. She reminded society that tokenized assets continue to be regulated by the current securities laws.

Her caution follows other platforms such as Robinhood and Kraken, which are trying out new models. Robinhood’s Ethereum-based tokens provide a side entrance to investments in secret companies and do not reflect a sense of actual ownership of shares. Kraken, which was developed by Backed in Switzerland, is a permissionless token (xStocks) that can be traded on decentralized exchanges and not on US-based ones.

The legal experts emphasize that compliance is essential even with technological advancement. Even with regulations, Anthony Tu-Sekine of Seward & Kissel felt that the process of offering and managing securities was still clearly regulated.

Past Failures Signal Need for Caution

Many initial projects in tokenization involved taxes, hence failing. Both of these exchanges, Binance and FTX, tried to offer tokenized stocks, but did not continue the services. The token contracts of Abra against the US stocks also failed after investigations by the SEC and CFTC, and received a fine for securities offenses.

Throughout this history, regulators seem willing to engage in dialogue. In May, the SEC organized a roundtable on tokenization. According to Commissioner Mark Uyeda, it was essential to consider the perspectives of investors and issuers when developing new financial instruments.