Securitize CEO Advocates Native Tokenization for Blockchain Securities

Securitize CEO Carlos Domingo has asserted that native tokenization is the sole genuine method for representing securities on a blockchain. He emphasized that any approach falling short of native tokenization risks misleading investors and undermining the potential of blockchain technology.

Domingo argued that the current landscape lacks a true on-chain model for securities, with most being confined to isolated systems. In contrast, native tokenization involves the direct issuance, recording, and management of securities on the blockchain, eliminating the need for intermediaries or replicas of traditional assets.

One example of native tokenization is Exodus, a crypto software company whose stock trades on the Securitize platform as tokens. This approach provides investors with a blockchain-based token that is legally equivalent to the share itself, thereby removing counterparty risks, operational friction, and fragmentation that often arise when records of value are stored both off-chain and on-chain.

Domingo also highlighted BlackRock’s Institutional Digital Liquidity Fund (BUIDL), a $2.8 billion money market fund, as an example of native tokenization at scale. Securitize acts as the fund’s on-chain transfer agent, maintaining the share register for all shares on its cap table on Ethereum, rather than relying on traditional centralized databases and third-party custodians.

Regulators have expressed caution regarding synthetic token offerings, warning that tokenized assets remain subject to securities laws despite the technological advancements. SEC Commissioner Hester Peirce reminded the industry and retail investors that blockchain technology does not alter the legal nature of an asset.

Her remarks come amid growing concerns over non-native token models, such as those recently launched by Robinhood and Kraken. Robinhood’s tokens, which debuted on Ethereum’s Arbitrum network, do not correspond to direct ownership in stocks but provide indirect exposure to private companies via tokenized contracts. These tokens are not tradeable off the platform and are subject to full KYC checks.

Kraken’s xStocks, released through the Switzerland-headquartered company Backed, are permissionless and can be traded on decentralized exchanges. However, US investors remain locked out, highlighting the complex compliance landscape.

Lawyers such as Anthony Tu-Sekine, head of the blockchain group at a law firm, have pointed out that the legal boundaries remain clear despite technological developments.

Interest in tokenization has surged this year as platforms seek to bridge traditional finance and crypto. However, previous experiments have shown that shortcuts or vague models can lead to regulatory issues.

Crypto exchange giants have attempted to launch tokenized stock products in recent years, but such offerings were never realized due to regulatory implications. Abra, a digital asset platform, launched tokens based on contracts attached to US stocks and ETFs in 2019. After the SEC and the CFTC opened an inquiry, the company stopped the program and agreed to pay penalties for selling unregistered securities and breaking laws governing derivatives.

Regulators have been more open lately, with the SEC holding a roundtable on tokenization in May that gathered voices from the crypto and financial sectors. SEC Commissioner Mark Uyeda noted that the session was part of an effort to better understand the evolving market and emphasized the importance of considering the perspectives and experiences of investors and issuers.