Following on last week's SEC, May 12: "Tokenization: Our Field of Dreams? Remarks at the Crypto Task Force Roundtable on Tokenization".
From Ledger Insights, May 13:
During one of yesterday’s panels at the U.S. Securities and Exchange Commission (SEC) roundtable on tokenization, incumbents were urged to avoid attempting to hamstring new technology players. BlackRock’s Robert Mitchnick said that rather than forcing startups to comply with obsolete regulations, there’s a need to modernize. This tension between innovation and regulation set the tone for the discussion that followed. A key goal of the roundtable was to find out what regulatory issues need addressing.
Five of the nine panelists work for major asset managers: Apollo, BlackRock, Fidelity, Franklin Templeton and Invesco. These institutions stand to benefit most from embracing public blockchains, by exploiting efficiencies and reducing layers of intermediaries. Two of the panelists represented intermediaries: the DTCC and Nasdaq. While they gave fairly balanced perspectives, they advocated for the most caution, particularly Nasdaq.
The key topics covered were how to define tokenization, interoperability, practical use cases and the need for regulatory changes.
Concrete opportunities – collateral
The tokenization opportunity most discussed currently in the traditional finance (TradFi) sector is tokenized collateral management, and the panel was no different.
BlackRock’s Mitchnick described the current process of using money market funds for collateral without tokenization. “You first have to liquidate it (the money market fund), deliver cash, and then instruct reinvestment into a money market fund, which is obviously a very inefficient and friction filled system, which can also add sell pressure in times of market stress,” he said. That’s because liquidating funds to meet margin calls ends up creating a sell spiral, requiring more margin calls.
By contrast, with a tokenized money market fund, you don’t have to wait for daily redemptions. You can sell it in the secondary market and post stablecoins as collateral in real time. Alternatively, you can instantly transfer the money fund as collateral. And collateral plays an important role for derivatives, repo and securities lending.
Franklin Templeton’s Sandy Kaul pointed to the potential to not just tokenize the fund, but also the underlying Treasury securities. She emphasized how important this can be in a crisis. Lehman Brothers lawsuits took years to figure out who owned the collateral.
She explained, “If we could immediately move from the tokenized money market fund and into the tokenized assets that sit within that fund, we can immediately get the collateral and begin to unwind all of the obligations in the marketplace.”....
....MUCH MORE
Also at Ledger Insights:
April 30 - BlackRock to issue DLT shares in Treasury fund via BNY
BlackRock recently filed a registration statement about plans for the issuance of DLT shares in its $143 billion Treasury Trust Fund (TTF). The shares will only be available via Bank of New York Mellon (BNY), which will use blockchain to mirror the share ownership on-chain. Institutional investors are the primary target with a minimum investment of $3 million, which is the same across the whole fund.
While BlackRock has leaned into tokenization with its BUIDL tokenized treasury fund issued on permissionless blockchains via Securitize, the target market (for now) is primarily crypto institutions. Stablecoin and tokenized money market fund (MMF) issuers are the primary BUIDL token holders....
May 6 - Citi plans to tokenize private companies on SIX Digital Exchange
May 12 - Hong Kong arm of China’s largest broker to launch tokenized securities
May 13 - VanEck launches tokenized money market fund with Securitize
May 16 - Franklin Templeton unveils Singapore tokenized money market fund
The outro from that post on the SEC roundtable: "It's all happening right now and as the kids used to say, ya snooze, ya lose"
Previously on the commercial side of things:"Tokenized, Inc: BlackRock's Plan To Own The Fractionalized World"
"BlackRock CEO wants SEC to ‘rapidly approve’ tokenization of bonds, stocks: What it means for crypto"
And the regulatory: BIS/New York Fed: Hell Yes We Can Run Monetary Policy In A Tokenized World
