U.S. tokenized securities debate needs competition over gatekeeping

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U.S. tokenized securities debate

Highlights

McHenry outlines three emerging U.S. tokenized securities models: market infrastructure tokenization, customer-driven tokenization, and issuer-sponsored tokenization.
He warns that permitting only one approved format could restrict competition, reduce market innovation, and potentially harm investor confidence in tokenized products.
McHenry calls for regulatory clarity that preserves competition, prevents walled gardens, and matches oversight to each product's underlying economic and legal structure rather than blanket approval.

Competing models in tokenized markets

As outlined in an opinion column published by CoinDesk, McHenry says tokenized securities should not be forced into a single approved format before the market tests which structures work best for investors and issuers.

He describes at least three models now emerging. One is market infrastructure tokenization, where securities remain within the existing framework of broker-dealers, custodians, securities intermediaries and DTC records, while blockchain is used to improve recordkeeping, reconciliation, collateral monitoring and transfer controls.

A second is customer-driven tokenization, which includes products such as notes or other instruments designed to track the performance of U.S.-listed stocks or ETFs and backed by underlying securities or collateral. McHenry says these products are not the same as directly registered shares and should not be presented that way, adding that regulatory treatment should follow their economic and legal structure rather than the mere use of tokenization.

The third model is issuer-sponsored tokenization, where a company and its transfer agent support tokenized ownership directly. He says that route may suit many issuers because it can link tokenized records with shareholder systems and support corporate actions, recordkeeping and communications.

Policy stakes for U.S. capital markets

McHenry warns that one risk is a market in which products use the language of stocks without making clear what investors actually hold, which he says could damage confidence and harm investors. He also cautions against tokenization developing into private walled gardens that restrict competition before the market determines which approaches are most effective.

In his view, U.S. markets remain strong because they combine investor protection with competition, capital formation and adaptability. He argues that a more customer-centric approach to tokenization can connect global demand to U.S. assets and liquidity, improve transparency and monitoring, and preserve the legal protections already embedded in the securities system.

McHenry says market participants are already testing different tokenization structures, including models built around current securities infrastructure, onchain products directly or indirectly backed by U.S.-listed securities and ETFs, and issuer-led approaches. He argues that clear rules are still needed, but says clarity should not mean allowing one group to decide which tokenized model is permitted to exist.

In our earlier article on the Supreme Court’s decision expanding presidential removal power over FTC commissioners, we covered the ruling allowing President Donald Trump to remove FTC Commissioner Rebecca Slaughter and other members of independent agencies under the executive branch. We also noted the potential spillover for other regulators with similar “for-cause” protections, while a related decision treated the Federal Reserve differently by keeping safeguards for its governing board in place.

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