Chairman Jay Clayton said that the US Securities and Exchange Commission (SEC) hopes to promote the development of tokenized exchange-traded funds (ETFs). The agency is working with other U.S. regulators to determine how to regulate different encryption products.
SEC publicly tokenizes ETF
SEC Chairman Jay Clayton talked about the committee’s approach to overseeing encryption products in a panel discussion hosted by the Digital Chamber of Commerce earlier this month. The theme of this event is “The Two Sides of American Coins: Innovation and Regulation of Digital Assets”. At the same time, the acting currency Brian Brooks (Brian Brooks) serves as the acting controller.
The Financial Times quoted Clayton as reporting that the SEC “is actively formulating regulations that may one day allow the use of cryptocurrency versions of ETFs.” The SEC is working with other U.S. regulators, such as the Office of the Comptroller of Currency (OCC) and the Commodity Futures Trading Commission (CFTC), to determine which regulator has jurisdiction over different crypto products.
Clayton pointed out that the utility of tokens determines which regulator should take the lead. Clayton said that although banking regulators should supervise tokens specifically used for payment, such as some stablecoins, the tokenization of ETFs should be within the scope of the SEC’s jurisdiction. He emphasized that the SEC will and is willing to supervise it. He said:
Our door is open. If you want to show how to mark ETF products in an efficient way, we hope to meet with you, and we hope to facilitate you. Of course, you must register it and then do the same thing as any other ETF.
“Tokenization allows the use of designated cryptocurrency assets, similar to Bitcoin [BTC] —Represent a type of security, such as stocks or a basket of securities, such as funds or ETFs,” the Financial Times explained.
Jonathan Steinberg, CEO of Wisdomtree Investments, stated in another panel at the same event that tokenized investment “is an opportunity to do better than ETFs.” The publication conveyed that Franklin Templeton Investments submitted a document to the US Securities and Exchange Commission last year for a government money market fund containing traditional and tokenized stocks.
Clayton claimed that the SEC’s regulatory framework “has been tested by many innovations over time.” He asserted that today’s transactions are electronic transactions, and traders use digital inputs instead of stock certificates as they did 20 years ago. “All It may be good that these are tokenized.” However, the chairman warned: “But you must abide by the principles.” For example, stock issuers and insiders should be held accountable. He described:
One of the problems we encountered was that we took the wrong steps in this innovation… I think now, three years later, four years later, we are in a better position.
He recalled: “There is a theory that because it is so effective and because it can bring too much hope, we can abandon some principles of responsibility and transparency.” The chairman now said: “We have seen blockchain technology, The prospect of distributed ledger technology brings efficiency to what I call a time-tested framework.”
One of the areas that Clayton and Brooks have been discussing is how to clearly define what security is. The SEC chairman clarified: “If you don’t plan to raise funds for your network, and you don’t want people to get rewards on your network, it may not be a guarantee of security.” “But if you want to do it with tokens Funding the network, or providing people with the rewards of using the network with tokens… Obviously, this is safe.” He added: “We are trying to figure out where these boundaries are so that people can mature the payment system .”
The SEC chairman continued: “We don’t like people saying,’You know that function is payment, so you really should go beyond the scope of securities law.’ I can’t do it, you know, I won’t do my job.”
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