Citadel Cautions SEC on Tokenization Risks and Innovation
The SEC's plan to streamline securities tokenization may not benefit investors unless it fosters genuine innovation and efficiency, according to Citadel Securities. Tokenization aims to reduce costs and enhance efficiency by minimizing intermediaries and enabling fractional ownership. A World Economic Forum report suggests that the benefits of tokenization will grow as more institutions recognize its advantages. Major firms like BlackRock and Franklin Templeton are participating in tokenization, with SEC Chair Paul Atkins advocating for its potential and proposing an "innovation exemption." However, Citadel warns that tokenization could drain liquidity from traditional markets and create inaccessible liquidity pools for institutional investors. JPMorgan is exploring Bitcoin-backed loans, indicating a shift in its crypto stance, but faces challenges such as secure custody and collateral volatility. Institutions must also address issues like safe self-custody to promote mainstream adoption of digital assets.
