What If the Only Companies That Let Their Stocks Be Tokenized Are Crypto Firms? — Barrons.com
By Joe LightThe tokenized stock market planned by crypto firm OKX and New York Stock Exchange-owner Intercontinental Exchange has run into a major roadblock. The problem? Companies outside the crypto industry are saying no.As of the latest public notice, every non-crypto-tied stock issuer originally announced by the venue had objected to being included. The only firms listed on the original notice that have not objected are Coinbase Global, Robinhood Markets, Circle Internet Group, Strategy, Securitize and BitGo, all of which have ties to the crypto industry.Securitize, Robinhood and BitGo said they plan to allow their shares to be traded on the platform. Spokespeople for OKX and Circle declined to comment. ICE and the rest of the companies did not respond to requests for comment."We're encouraged by the companies that have chosen to participate and hope more issuers will follow their lead as they better understand the opportunity," said Securitize CEO Carlos Domingo in a statement.A Robinhood spokesperson said the company sees tokenization as the future of markets and "would rather be part of building it than sit on the sidelines."A BitGo spokesperson said the company sees "a lot of promise in this space and will continue to evaluate new opportunities with the same focus on security and customer protection that guides everything we do."Crypto and Wall Street firms in the past couple months have moved forward rapidly with projects that turn traditional assets like stocks and bonds into "tokens" powered by the same technology underlying cryptocurrencies like Bitcoin.The goal isn't to make stocks as volatile as crypto but to replace some of the intermediaries and traditional processes that make trades slow to settle with "blockchain" technology that allows for near-instant transfers and settlements. Proponents of the shift say that tokenized markets could enable 24/7 stock trading and reduce collateral needs, among other benefits.The issuer objections are part of a process the Securities and Exchange Commission established for firms that want to create "tokenized securities venues" that don't have to comply with all the rules that typically apply to exchanges. As part of the process, the SEC required that the venues give stock issuers a chance to object to being listed.OKXICE in its original notice included 62 companies whose shares it planned to list. All but six of them have now objected, according to its updated public notices. The company has received 11 additional objections from companies that weren't on the earlier list. OKXICE hasn't updated its public notices to show the complete list of firms it's reached out to. So it's unclear whether there are additional stocks that could appear on the venue that aren't in the public notices.The spate of objections doesn't mean that tokenization is dead on Wall Street, but it is a sign that issuers will need more convincing about OKXICE's model.Shortly after the venue was announced, OKXICE co-chairman and former New York Governor Andrew Cuomo told Barron's he anticipated there being objections from issuers who didn't yet understand the benefits of the project and were concerned with how their stocks might trade on the new exchange.Last month a spokesperson for one of the objectors, Applied Optoelectronics, said that the company was concerned that the OKXICE venue could impact its stock's pricing, liquidity, and volatility.Other stock tokenization projects don't need issuer consent and have already launched. A service run by the Depository Trust & Clearing Corp. launched in late October allowing institutions to turn about $30 trillion worth of securities into tokens. Unlike the proposed OKXICE venue, that project doesn't affect retail investors directly and instead involves how institutions can move shares around after a trade has happened.Retail investors may yet see their own shares get tokenized, but the companies who issue the stocks will have to hold off on objecting first.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.