Companies Are Saying No to Tokenized Stocks-and Testing Wall Street's Crypto Push — Barrons.com
By Joe LightCrypto firms want to bring stocks to the blockchain, but a growing number of companies want no part of the new "tokenized securities venues."OKXICE, a joint venture between crypto firm OKX and NYSE parent company Intercontinental Exchange, this week posted a notice disclosing that nine companies have objected to having their stocks traded on its proposed tokenized securities venue. That knocks out about 14% of the 63 stocks that the venture planned to include.The opt-outs are part of a process established by the Securities and Exchange Commission to allow trading of tokenized stocks.The SEC last month issued a so-called innovation exemption to let companies offer "tokenized" versions of traditional stocks. The new tokens would trade over blockchains, similar to cryptocurrencies like Bitcoin, but would represent shares of real companies with the same governance and dividend rights.However, as part of the exemption, the SEC required companies to post a public notice of their intent to launch a TSV and to give firms individually a chance to object to having their shares included on the new platform.When OKXICE first posted its notice, it disclosed that Cerebras Systems had objected. As of Friday, the objectors also include AppLovin, Applied Digital, Rocket Lab, CoreWeave, Verizon Communications, Applied Optoelectronics, Broadcom, and UnitedHealth Group.A spokeswoman for networking supplier Applied Optoelectronics said in a statement that the company objected because the framework is new and could have an uncertain impact on its stock's pricing, liquidity and volatility."At this stage, we don't see a clear benefit to AOI or our shareholders that justifies these uncertainties, and we will continue to evaluate the framework as it develops," said the spokeswoman, who also said the company did not want investors mistakenly believe that AOI had endorsed the offering.The other eight objecting companies did not immediately respond to requests for comment.OKX declined to comment. ICE did not immediately respond to requests for comment.In an interview with Barron's earlier this month, former New York Governor Andrew Cuomo, who is now OKXICE co-chairman, said that objections from some companies were expected."There's going to be a transition period. It's so different. Some companies will jump in. Some will wait and see," Cuomo said.Though it was never included on the OKXICE list, exchange operator Nasdaq in a FAQ explained why it had planned to opt its own shares out of any of the new securities venues. It said that in deciding whether to opt out, issuers should think about how the venues could "undermine transparent price discovery, fair access to market data, and the safeguards" that some traditional stock market regulations provide.Company opt-outs might restrict some of the new securities venues, but other stock tokenization projects that don't rely on issuer cooperation are likely to continue apace. Nasdaq itself is among the firms participating in a project by the Depository Trust & Clearing Corp. to tokenize stocks. SEC staff last year issued DTCC a "no-action" letter allowing it to proceed with its project without needing issuers' permission.Unlike the OKXICE venture, which would allow retail investors to trade tokenized stocks, the DTCC service mostly involves what happens after a trade has occurred. Institutional investors can use the service to transform shares into tokens and then transfer them almost immediately on a 24/7 basis.Write to Joe Light at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.