SEC creates temporary path for tokenized stocks as related shares rally

The SEC created a temporary regulatory path for certain entities to issue tokenized stocks. Robinhood rose more than 7% on Friday. Coinbase rose 10% on Friday. Strategy rose 12% on Friday. Tokenized stocks are facsimiles of traditional company shares that trade on blockchain networks. Peter Christiansen at Citi wrote that tokenization could reshape how securities are issued, owned, transferred, financed and distributed across global capital markets. Christiansen said institutional investors, asset managers, brokers and retail shareholders could benefit. He wrote that tokenization could reduce minimum investment sizes, improve global access to U.S. securities and enable fractional ownership. The rule followed the stalling of the Clarity Act in Congress. The Clarity Act would have allowed some stablecoins to generate interest and could have taken deposits away from banks. The SEC rule came with a similar Commodity Futures Trading Commission rule that restricts enforcement on access to digital assets. Tokenized stocks can be programmed into trading algorithms more directly than some regular securities. The London School of Economics said algorithms conduct between 60% and 70% of all stock trading. Ed Engel at Compass Point wrote that Bullish could be the leading beneficiary of the SEC's innovation exemption. Bullish has a pending acquisition of Equiniti, which Engel identified as the #2 transfer agent. Engel said Bullish could cross-sell tokenization services to Equiniti's 3,000 customers. He estimated an about $300m revenue opportunity if Bullish cross-sold the services to 10% of those customers. Engel also identified Robinhood, Coinbase, Circle Internet, BitGo, Exodus Movement and DeFi Technologies as potential beneficiaries. Morgan Stanley identified Robinhood, Coinbase and Gemini Space Station as potential beneficiaries.