Tokenized Equity Securities

The letter argues that tokenized U.S. equities should be treated in the same manner as traditional equity securities from a regulatory perspective, particularly when it comes to principles such as best execution, fair access, and pre- and post-trade transparency. The letter also emphasizes the importance of investor protection, capital formation, and market liquidity and efficiency.

The letter identifies several areas of concern, including:

1. The potential for tokenized U.S. equities to siphon liquidity away from U.S. equity markets and create new liquidity pools that are inaccessible to many U.S. equity market participants.
2. The impact on competition amongst markets if vertically integrated digital asset trading venues control onboarding, pre-funding, and settlement rails on blockchains that are not interoperable with the rest of the equities markets.
3. The potential for issuers to lose transparency regarding their shareholder base and for investors to be confused about the fact that they are not issued by, or endorsed by, the relevant company.
4. The potential for tokenized U.S. equities to further reduce the incentives of companies to secure capital from our public markets.

The letter concludes by urging the SEC to reject broad exemptive requests and instead pursue targeted refinements to a limited set of Commission rules and regulations to accommodate specific immutable characteristics of tokenized U.S. equities. The letter also encourages the SEC to partner with the CFTC and foreign regulators to ensure global coordination and safeguard U.S. equity markets from other novel products referencing U.S. underliers.