Defining Digital Assets and Tokenized Securities

To set them apart from other digital assets, Domingo first argued legislators need to define digital assets and tokenized securities more precisely.

“This lack of clarity is today impeding regulators to really understand the unique traits of compliant tokenized securities and to regulate them accordingly,” he said.

Challenges Facing Special Purpose Broker-Dealers

Regarding SPBDs, Domingo remarked their framework “is frustrating, difficult to achieve, limited in scope and temporary.” Institutions approved by the U.S. Securities and Exchange Commission to handle particular securities, including digital assets, are SPBDs. “We also think that SPBDs should be allowed to store stablecoins in order to enable quick on-chain transactions between cash and securities. This is not possible today.”

Blockchains—public and permissionless as well as private and permissioned—must be able to run tokenized securities, Domingo also noted. He noted that alternative trading platforms such as peer-to–peer transfers between whitelisted wallets have to be qualified trading venue.

“Tokenized securities can expedite and condense trading and settlement to near real-time and enable the merger of trading and post-trading activities, eliminating the need for central securities depositories. The European Commission for Europe now uses this model, hence US companies should be able to realize similar efficiencies and capabilities,” Domingo stated in the hearing.

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“These ideas are fundamental for what tokenized securities framework should include,” he said. “To realize this promise and avoid falling behind Europe and other markets where regulation for tokenized securities is more established, I encourage you to prioritize Legislation or encourage clear SEC guidance that facilitates safe responsible and compliant tokenizing of financial assets as soon as possible.”

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