Crypto exchange Kraken has met with the US Securities and Exchange Commission’s (SEC) Crypto Task Force to discuss the regulation and potential of tokenised trading systems. The meeting comes at a time when regulators and traditional exchanges are calling for stricter oversight of tokenised stocks.
The SEC Meeting: Focus on Tokenisation
According to a memorandum filed on Monday, the SEC held discussions with representatives from Payward, Inc., Kraken Securities LLC, and legal advisors from Wilmer Cutler Pickering Hales and Dorr LLP. The agenda focused on the legal framework for tokenised assets, operational requirements for such a system, and the possible benefits of tokenisation.
The talks underline growing regulatory interest in tokenised financial products. While tokenisation allows for faster, more flexible and global trading, the SEC and other regulators remain concerned about the absence of investor protections that exist in traditional markets.
Concerns from Traditional Markets
Global regulators and traditional exchange associations have been vocal in urging the SEC to take a tougher stance on tokenised stocks. Their main concern is that these products lack the safeguards, oversight, and compliance requirements of traditional financial markets.
Tokenised stocks can be traded 24/7 without the same restrictions as regulated exchanges. While this brings accessibility and innovation, it also raises risks for investors. The associations argue that without proper frameworks, tokenised trading could expose investors to greater fraud and market manipulation.
Kraken and Robinhood Push Ahead
Despite regulatory concerns, crypto-native platforms continue to expand tokenised stock offerings. On 22 May, Kraken announced the launch of its tokenised stock service, allowing non-US investors to trade US equities around the clock. Just over a month later, Robinhood rolled out a similar service in the European Union on 30 June.
Kraken has also expanded its offering by making tokenised stocks available on the Tron blockchain, broadening access and increasing liquidity. The move demonstrates Kraken’s ambition to lead in the emerging market for tokenised equities.
According to a recent Kraken survey, 65% of 1,000 US investors who hold both crypto and equities believe crypto will outperform traditional stocks in the next decade. Kraken executives have highlighted that tokenised assets should not simply copy Wall Street’s system but should instead focus on accessibility, programmability, and global reach.
Tokenised Stocks: A Growing but Early Market
Although the concept of tokenised stocks is gaining traction, the sector remains in its infancy. Data from RWA.xyz shows that tokenised stocks currently represent a total value of $360 million, down 11% over the last 30 days. This accounts for just 1.35% of all tokenised Real World Assets (RWAs), which total nearly $26.5 billion onchain.
Research from Binance suggests the long-term potential is enormous. If just 1% of the global equities market becomes tokenised, the sector could surpass $1.3 trillion in market capitalisation. This illustrates both the scale of the opportunity and the urgency for regulators to address key risks before the market grows further.
Outlook for Tokenisation
The SEC’s discussions with Kraken highlight the tension between innovation and regulation in the financial sector. While tokenised stocks promise greater accessibility and global reach, the lack of established rules poses challenges for both platforms and investors.
If regulators and industry players can strike a balance between compliance and innovation, tokenisation could transform capital markets. With trillions of dollars in potential value at stake, the debate around how best to regulate and develop tokenised assets is only just beginning.
