The disputed products are debt securities issued by a Robinhood offshore subsidiary — what Aron calls a “fictitious synthetic equity market.” The tokens track a stock's price but give buyers no ownership of the underlying shares. The industry calls these synthetic products "wrappers."
Beyond their kerfuffle, Tenev correctly recognizes a massive opportunity: giving millions of underserved international investors access to U.S. equities markets. The United States has a population of roughly 340 million people. The number of individual investors living outside of the U.S. is at least that number, but the overwhelming majority of them cannot buy into U.S. markets directly or affordably. Expand access through tokenization, and global investment will flow into American companies. This expanded pool of investment capital represents the biggest opportunity American markets have had in over fifty years
But firms offering these synthetic securities see this once-in-a-generation opportunity as their own, inserting themselves between international investors and U.S. markets to capture the trading activity, liquidity, and fees that global demand for U.S. stocks creates
Put more bluntly: Synthetic tokenization of U.S. equities shortchanges the American public
A wrapper touches the U.S. capital markets only once, when the issuer buys shares to hold as collateral. From then on, the trading happens offshore, token holder to token holder, and none of it reaches the exchanges where the company's shares trade. The result is misdirected investor demand in a U.S. company that does not reflect a genuine increase in the market capitalization of that company. Multiply that mismatch across nearly 200 U.S. companies already tokenized this way, in a market Citi projects at $2.7 trillion by 2030, and the opportunity cost to American companies and portfolios potentially compounds
On September 17, the SEC drew the line. Its long-awaited "innovation exemption," which lets blockchain venues list and trade tokenized securities, excludes synthetic tokens outright. Qualifying tokens must represent real ownership, and, in Chairman Paul Atkins' words, they "must provide holders with the same rights and privileges as the traditional securities," dividends and voting included. The SEC’s innovation exemption even addresses AMC's concerns by requiring that companies get notice and the right to object before a third party tokenizes their shares
The better model is not a whitepaper or promise; it is already being built at the very center of U.S. markets. A share can be tokenized as a digital twin of a security custodied at the Depository Trust Company, which is the custodian of virtually every publicly traded U.S. share. Under the tokenization service DTCC plans to launch this year, the token and the traditional security are one asset in two forms; the share never leaves the national clearing and settlement system. A foreign investor who buys that token through a licensed venue buys the share, and the order deepens the market Americans trade in
U.S. markets are the envy of the world because investors trust that whoever owns a share owns it fully. The synthetic models cheapens that trust, shortchanges U.S. investors, and undercuts the issuer-led capital markets model. The digital twin does the opposite: it extends full ownership to millions of potential new investors and directly American companies with increased access to capital
Global Investors will invest in U.S. equities one way or another. Done right, tokenization will galvanize American capital markets – markets that can trade around the clock, settle more efficiently and remain the deepest and most trusted in the world — and create a generational influx of investment into America
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates
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