The financial press covered it as a market structure story.

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It is that, but the more interesting part is buried in the justification. The SEC’s own release argues that U.S. equity markets have failed to adopt mechanisms that “emerged naturally in crypto”: intents-based trading, automated market makers, decentralized price oracles, and atomic cross-domain settlement. It cites these approvingly, not as risks to be managed, but as innovations that prescriptive rules like Rule 611 have prevented.

That sentence in a formal SEC proposing release is worth reading closely.

Rule 611 required trading venues to avoid executing orders at prices inferior to protected quotes displayed elsewhere. When it was written, the internet was eleven years old and algorithmic trading was a novelty. The rule created enormous compliance infrastructure, contributed to exchange proliferation across seventeen venues, and produced the kind of fragmentation it was meant to prevent.

The SEC’s argument now is that none of that complexity is necessary given how fast and interconnected markets actually are, and that broker ‘best execution’ obligations are a sufficient backstop.

For tokenization practitioners, the direct effect is narrow: Rule 611 applies to NMS stocks, meaning exchange-listed public equities. Most tokenized securities in market today, including everything issued under Reg D, Reg A, or Reg S, are exempt offerings and were never subject to it.

If you’re building on Vertalo, this rule change does not affect your current infrastructure. What it does affect is the five-year picture. A tokenized public equity, once it becomes an exchange-listed NMS stock, would no longer need to navigate trade-through compliance or maintain intermarket sweep order infrastructure.

For any venue operator building tokenized equity trading, that’s a meaningful cost reduction - and cost is measured in time as much as in treasure.

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More importantly, it opens the door to trading protocol designs that the old rules made legally precarious: something that behaves like an AMM for registered equities, for example, or intent-based settlement where a buyer and seller atomically exchange a security for cash on-chain without routing through a traditional market center.

The SEC is also cross-referencing its January 2026 Statement on Tokenized Securities in the same release. That statement was the first formal acknowledgment that issuing a security as a tokenized instrument does not automatically change its legal character. When you pair these two seemingly un-related documents you get a picture of an SEC that is, for the first time in a long time, building a conceptual framework for tokenized public equities - rather than just sending Wells notices.

None of this is an explicit green light. There is still no clear registration path for a tokenized NMS stock, no custody rules written for on-chain settlement, and no exchange application framework that accounts for blockchain-native market structure. The rule rescission removes an obstacle; it does not build the infrastructure and that doesn’t happen just because of a rule recission. But the direction of travel is different than it was eighteen months ago, and the language the SEC is using to describe crypto-native mechanisms has changed from “enforcement risk” to “innovation we want in traditional markets.”

Popcorn time! And worth tracking.

Dave Hendricks is the founder and CEO of Vertalo, which has operated a continuous, integrated transfer agent and tokenization platform for eight years.

The Vertalo Securities Protocol (VSP) is Vertalo’s standard for the issuance, management, and transfer of tokenized real-world assets. Like ERC-3643 and DS Protocol, VSP is an RWA tokenization standard. Unlike those approaches, VSP was designed from the beginning around a different premise: the token should delegate control to the appropriate party, not seize it.

VSP is chain-agnostic by design. We built it to be independent of any single blockchain’s assumptions about execution model, finality semantics, or token standards. Chain selection involves real tradeoffs, and those tradeoffs evolve as the technology matures. Supporting multiple chains isn’t hedging; it’s the architecturally correct position for a platform that serves regulated issuers and their investors across a multi-year lifecycle.

Vertalo has supported Ethereum (public and private), Tezos (public), and now adds Aptos (public) to the VSP chain registry. This post explains why Aptos earned that integration slot, grounded in the specific technical properties that matter for securities issuance, cap table management, and transfer agent operations. This isn’t a marketing announcement. It’s a technical accounting of what Aptos offers and what that offering means in the context of regulated asset infrastructure.

For background on how VSP is architected and how it connects to Vertalo’s API layer, see the VSP Overview in the Vertalo API Primer and my earlier post on The Vertalo API Standard.^[1]

Introduction

When evaluating a new chain for integration into VSP, we don’t begin with ecosystem buzz or token price. We begin with protocol fundamentals: the execution model, the type system, the consensus mechanism, and the developer surface. For a transfer agent, the correctness and auditability of on-chain state transitions aren’t nice-to-have properties. They’re the product. An error in token accounting isn’t a UX degradation; it’s a regulatory event.

Aptos was designed by engineers from the Diem project at Meta, and it carries that lineage in a specific and consequential way. The Move programming language, originally developed for Diem, is the execution layer for Aptos. Understanding Move is the starting point for understanding why Aptos is technically differentiated from first-generation smart contract platforms (e.g., Ethereum), and why that differentiation is directly relevant to what Vertalo does.

The Aptos team has published a formal white paper^[2] covering the full system design. What follows focuses on the properties most relevant to regulated asset infrastructure.

VSP: The Vertalo Securities Protocol

VSP, the Vertalo Securities Protocol, is an RWA tokenization standard. It belongs to the same category of institutional tokenization infrastructure as ERC-3643 (the Tokeny standard, now part of Apex Group) and DS Protocol (the Securitize standard). All three define how ownership of a regulated security is represented on-chain, how compliance logic is enforced, and how transfers are governed. VSP is Vertalo’s answer to those same questions, and its answer is architecturally distinct.

Vertalo began work on VSP in early 2019, in direct response to what we were learning from our engagement with the SEC and FINRA during the early wave of security token activity. Those conversations shaped the protocol design from the ground up. The central issue was control.

Most compliance-aware token standards, including ERC-3643 and DS Protocol, treat the token contract itself as the compliance intermediary. The contract controls who can hold the token, who can transfer it, and under what conditions. The transfer agent, the issuer, and the relevant regulatory counterparty interact with the token on terms the contract defines. Compliance logic is centralized in the contract; the traditional principals of a securities transaction become privileged callers on someone else’s system.

Vertalo doesn’t subscribe to first-generation compliance-aware tokenization approaches.

VSP was designed around a different premise. A VSP-issued security token represents ownership natively in the token, but the authority over transfers, restrictions, and corporate actions stays with the appropriate party, whether that’s the transfer agent, the issuer, or the custodian, not with the token contract. VSP doesn’t position itself as an intermediary that other parties route through. It’s a delegation system: the protocol delegates authority to the parties that should hold it under securities law, rather than centralizing it in a smart contract layer that the protocol author controls.

This distinction isn’t academic. It’s practical, mechanical, and ultimately compliant in a way that reflects how securities transactions are executed in the real world. A transfer agent using VSP is in control of the securities records in the way a transfer agent should be. They’re not operating as a privileged caller on someone else’s protocol.

VSP’s chain-agnostic architecture reflects the same logic. Vertalo isn’t betting on a single chain because our clients, regulated issuers and their investors, operate across multi-year asset lifecycles. Chain selection involves real tradeoffs, and those tradeoffs evolve. Supporting multiple chains is the architecturally correct position, not a hedge.

That brings us to Aptos, and why its properties make it a particularly good fit for VSP, not just for the liquidity and distribution use cases that dominate the tokenization conversation, but for the record-keeping functions that are the operational core of transfer agency.

Beyond the Token: DLT’s Real Value in Transfer Agency and Asset Management

Aptos offers transfer agencies and securities issuers four properties that the operational context actually demands:

● Low and predictable transaction costs. Aptos’s fee structure is stable and substantially lower than mainnet Ethereum. For high-frequency operations like active cap table management and distribution events, fee predictability isn’t just nice to have; it’s an input to product design.

● Low latency, high throughput. Most transactions execute in the sub-second range (~100ms), and the network is capable of processing theoretically hundreds of thousands of transactions per second.

● Fast and deterministic finality. Aptos’s AptosBFT consensus mechanism provides deterministic finality in sub-second windows under normal network conditions. When a transfer settles on Aptos, it has settled. There’s no confirmation window management, no reorg handling in application code, no ambiguity in the state of the ledger.

● Long-term protocol stability. Aptos’s modular architecture supports protocol upgrades through on-chain governance rather than coordinated hard forks. For a platform like Vertalo that maintains long-term relationships with issuers across multi-year lifecycles, a predictable upgrade path isn’t optional.

● Compile-time correctness guarantees on asset logic. Move’s resource-oriented type system provides guarantees that aren’t available on Solidity-based chains. A resource can’t be copied unless explicitly declared copyable and can’t be destroyed unless explicitly declared droppable. For a cap table that has to reconcile to the cent, this class of error prevention is material.

Together, these five properties constitute a technical case for Aptos as the right substrate for regulated asset infrastructure, not for token trading, but for the work that happens before and after a trade: recordkeeping, corporate actions, distributions, and the ongoing maintenance of a master register of securities holders.

The cost picture is the most immediate illustration. Dave Hendricks, in Is Asset Management the Killer App for Distributed Ledger Technology?^[3] (ChainEnabled, November 2024), cites the benchmark from Franklin-Templeton: the legacy cost of clearing 50,000 transactions is approximately $50,000; with DLT, the equivalent operation costs approximately $1.52. That’s roughly a 30,000x reduction. This isn’t marginal efficiency gain; it’s a structural shift in the cost basis of asset administration that changes what kinds of products are economically viable to build and distribute. Aptos’s fee structure makes numbers like this attainable in production, not as a whitepaper projection, but as an operational baseline.

These properties were the wrong question to ask when the only use case in view was secondary-market token trading. They become the right question as soon as the use case shifts to what DLT is actually well-suited for: transfer agency, master security holder files, shareholder recordkeeping, and the programmatic administration of asset management functions.

The public conversation about blockchain in real-world asset contexts tends to center on the trading of so-called “security tokens.” That’s a narrow framing. The more durable and operationally significant applications of distributed ledger technology begin at the foundational level, at the functions that have to work correctly every day, across multi-year lifecycles, under regulatory scrutiny. Blake Richman’s DLT Use Cases in Asset Management^[4] (ChainEnabled, November 2023) articulates why this foundation matters. DLT, as an append-only database, creates a golden source for trust and audit across asset classes. Ownership records and their associated events (eg. mint, burn, transfer) become immutable and auditable by design rather than by convention. Smart contracts add programmability to the functions that historically required manual coordination: payments, disbursements, trading, corporate actions, shareholder votes.

As Naomi Miner describes in Vertalo’s Digital Transfer Agent^[5] (ChainEnabled, October 2023), the legacy transfer agency infrastructure is defined by manual entry, data silos, incompatible systems, and reconciliation friction. Vertalo’s purpose-built digital transfer agent addresses these problems by treating the distributed ledger as the authoritative record of securities and asset ownership across both issuance and secondary trading.

Ethereum dominates the conversation about RWA tokenization largely because of EVM compatibility and its breadth of ecosystem tooling. Those properties are most relevant to applications centered on secondary-market tradability and DeFi composability. They’re less determinative when the application is the ongoing maintenance of a master register of securities holders under SEC regulation. The chain properties that matter for transfer agency work, specifically cost, finality, stability, and correctness, point toward Aptos.

This is why Vertalo integrates chains based on specific operational properties rather than defaulting to whichever chain is largest by TVL (total value locked) or developer count. The question we’re answering isn’t “which chain is biggest” but “which chain is right for transfer agency and asset management operations at the institutional level.” On that question, Aptos has a credible and technically grounded answer.

The VSP Architecture: Chain-Agnostic by Design

VSP Chain Architecture — showing the VSP abstraction layer sitting above Ethereum, Tezos, and Aptos chain implementations, with the Vertalo API and client layer above

VSP is designed as an abstraction layer that normalizes the differences between chain execution environments. The VSP Overview describes the contract and library constellation that makes up the protocol. Each chain integration adds a chain-specific implementation of VSP’s controller and token interfaces, while the API surface that issuers and integrators interact with remains constant.

The addition of Aptos to the VSP chain registry expands the options available to issuers and FIs building on the Vertalo platform without changing the integration model for those clients. An issuer integrating with Vertalo via the VSP API doesn’t need to reason about Move, Block-STM, or AptosBFT. They interact with the same GraphQL API surface regardless of the underlying chain.

The Move Execution Model and Why It Matters for Securities

Move vs. Solidity token representation — comparing Solidity’s mapping-based approach with Move’s typed resource model and compile-time safety guarantees

Most smart contract platforms in production today descend from Ethereum’s execution model, in which contracts are programs that operate on an account-based state database. Token balances are entries in a mapping, and the contract logic governs who may modify them. The correctness of that logic is the programmer’s responsibility; the platform itself doesn’t enforce invariants about asset existence or uniqueness at the type level.

Move takes a fundamentally different position. It’s a resource-oriented language, meaning tokens and other digital assets are typed resources, not entries in a mapping. The Move type system enforces linear and affine resource semantics at compile-time: a resource can’t be copied unless explicitly declared copyable, and it can’t be destroyed unless explicitly declared droppable. These compile-time guarantees equate to runtime guarantees, providing a peace of mind that potentially catastrophic coding errors will not find their way into the production environment.

The consequence is that the accidental duplication, loss, or mishandling of tokens isn’t merely unlikely; it’s a category of error that the language prevents. For Vertalo’s use case, where a security token represents an ownership interest in a regulated instrument and the cap table must reconcile to the cent, this is a meaningful property. It reduces the attack surface for a class of correctness errors that have caused material losses on other chains.

The Aptos documentation covers the Move language fundamentals at Move on Aptos^[6], and The Move Book^[7] provides a thorough treatment of the language’s type system, resource model, and module structure. Developers coming from Solidity will find the resource semantics require a conceptual shift, but the safety properties that shift enables are well worth the learning curve.

The Move Prover^[8] extends this further, allowing developers to write formal specifications of contract behavior and verify them statically against the implementation. The Move Specification Language^[9] documentation covers the specification syntax and verification workflow in detail. Native formal verification of smart contracts is unusual in the industry; most ecosystems rely on audits,test suites, and/or third-party tooling which are probabilistic rather than conclusive. The Move Prover doesn’t replace audits, but it enables a class of static assurance that is otherwise unavailable. For FIs integrating with Vertalo, this translates to a higher confidence floor in the correctness of the on-chain logic governing their clients’ assets.

This matters specifically for VSP’s delegation model, one of its key differentiators when compared with ERC-3643 or DS Protocol. The correctness of a system that delegates authority to transfer agents and issuers is only as reliable as the enforcement of that delegation. Move’s resource semantics and formal verification tooling mean that the delegation logic in VSP can be specified and verified, not merely tested, before deployment. That purpose-built verification regime is a materially higher standard than what’s achievable on Solidity-based chains.

Execution, Finality, and the Settlement Window: Criticality in High-Frequency Financial Services Transactions

Block-STM parallel execution — comparing sequential transaction processing with Block-STM’s optimistic parallelism and conflict-based re-execution

Beyond correctness, the operational characteristics of a chain determine what kinds of workflows are practical to build on top of it. Two properties matter most for transfer agent operations: throughput under load and the reliability of finality.

Aptos uses Block-STM^[10], an optimistic parallel execution engine. Transactions are executed concurrently by default and re-executed only when a conflict is detected on a shared state. This parallel execution approach is materially different from sequential execution models, where throughput is bounded by the time to process each transaction in order. Block-STM doesn’t require manual state sharding or partitioning by the application developer; the parallel execution is a property of the runtime. The original Block-STM research paper (arXiv:2203.06871) details the algorithm and its performance characteristics under varying conflict rates. For Vertalo, this means that bulk operations, distributing dividends to a large cap table, or processing a redemption event, aren’t bottlenecked by serialization in the way they would be on a sequential chain.

AptosBFT finality — comparing probabilistic finality with AptosBFT’s deterministic sub-second finality and the implications for settlement certainty

Aptos uses the AptosBFT consensus mechanism^[11], a variant of HotStuff, which provides deterministic finality in sub-second windows under normal network conditions. This is a meaningful distinction from probabilistic finality models, where the settlement certainty of a transaction increases over time but is never absolute. (This differs from a chain like Ethereum where a transaction is considered final only after a certain number of blocks have been added to the chain.) Deterministic finality simplifies the client-facing UX for Vertalo’s issuers and their investors: when a transfer settles, it has settled. There’s no confirmation window management, no reorg handling in application code, and no ambiguity in the state of the ledger at any point in time. For regulated transfer agency, where the settled position of a security has legal significance, deterministic finality is the correct semantic.

Account Model and Onchain Governance

The Aptos account model^[12] includes several properties worth highlighting in the context of institutional asset management.

First, key rotation is supported natively: an account can rotate its signing key without changing its address. Full details are in the Account Key Rotation guide^[13]. This key rotation capability matters for institutional clients where key management is an ongoing operational function. Custodians rotate keys; institutional treasury operations rotate keys. A model that requires address migration on key rotation introduces reconciliation complexity that is entirely avoidable.

Second, Aptos supports multi-agent transactions^[14]: a single transaction can have multiple independent signatories, each authorizing their portion of the operation atomically. This primitive maps naturally to regulated workflows where both the issuer and the transfer agent, or the issuer and the investor, must co-authorize an action. Building equivalent logic on a chain without native multi-signer support requires off-chain coordination and additional on-chain contract logic. Native support reduces implementation surface and the corresponding audit scope. Additionally, traditional mult-sig and MPC transactions may be implemented for high-value use cases where latency is not a major concern (smart contract updates, emergency pauses, etc.).

Third, Aptos’s modular architecture decouples validators, execution, consensus, and storage. Protocol upgrades can be executed through on-chain governance without hard forks, a constant challenge when building on or maintaining certain other chains. For a platform like Vertalo, which maintains long-term relationships with issuers across multi-year asset lifecycles, protocol stability and a predictable upgrade path are operational requirements. A chain that requires coordinated hard forks for protocol changes introduces ecosystem risk that’s difficult to manage in a regulated context.

The Developer Surface and Standard Libraries: The Fungible Asset Standard

The Aptos Framework ships a set of audited standard modules for fungible assets, non-fungible assets (using the Token Objects standard), staking, and multisig. The Aptos Standards overview^[15] and the Fungible Asset Standard^[16] documentation are the primary references. The existence of audited standard libraries isn’t a convenience; it’s an architecture decision with meaningful implications. When token standards are provided by the protocol team and formally audited, developers building on top of them inherit a portion of that assurance. When developers implement their own token standards from scratch, as is common on chains without a rich standard library, each implementation is a fresh audit surface.

For Vertalo’s integration work (which is mostly via our GraphQL APIs), the Aptos Framework’s fungible asset standard provides a solid foundation for the on-chain representation of securities instruments. We don’t need to author our own token primitive; we extend a protocol-provided one. This materially reduces the scope of the security review required for each new issuance type and simplifies the reasoning about correctness across the platform.

The developer tooling is mature relative to the age of the network. The Aptos developer documentation^[17] covers the full toolchain: the Aptos CLI, the Move analyzer for VS Code, and the TypeScript, Python, Rust, and Go SDKs all provide a developer surface comparable to what Ethereum has accumulated over a much longer period. The official indexer exposes a GraphQL API, which aligns with Vertalo’s existing API architecture (as described in The Vertalo API Standard). Gas costs on Aptos separate storage and execution, and both are low and stable relative to fee-volatile chains. For high-frequency operations, those involved in active cap table management, fee predictability is an operational input to workflow design.

Ecosystem Infrastructure and Forward Roadmap: A Foundation for Further Innovation

The Aptos ecosystem’s infrastructure support provides the connective tissue needed for more complex product development. Major oracle providers including Pyth and Chainlink support Aptos. Cross-chain messaging infrastructure through LayerZero and Wormhole is available. Node infrastructure providers Alchemy and QuickNode support Aptos, which means developers can use familiar tools and workflows. The Aptos Foundation also runs grant programs and ecosystem funding for developers building on the network.

As the VSP roadmap extends into areas such as cross-chain asset portability (via chain-swapping among other methods), on-chain distribution payments, and programmable compliance logic, Aptos’s ecosystem depth is an asset that compounds over time. The formal verification tooling in Move, combined with the deterministic finality of AptosBFT, provides a foundation that becomes more valuable as the complexity of on-chain compliance logic increases.

Vertalo has done careful technical work to earn confidence in the chains we support. Aptos has earned its place in the VSP registry. We’ll continue evaluating the protocol’s new features and benefits to our issuers and integrated parties as it develops, and expand our integration accordingly.

We encourage you to do the same.

Further Reading

● The Vertalo API Standard — Kyle Brown, ChainEnabled (September 2023)

● DLT Use Cases in Asset Management — Blake Richman, ChainEnabled (November 2023)

● Is Asset Management the Killer App for Distributed Ledger Technology? — Dave Hendricks, ChainEnabled (November 2024)

● Vertalo’s Digital Transfer Agent — Naomi Miner, ChainEnabled (October 2023)

● Aptos White Paper

● Move on Aptos

● The Move Book

● Move Specification Language

● Block-STM: Scaling Blockchain Execution (arXiv:2203.06871)

● Aptos Blockchain Deep Dive

● Account Model and Key Rotation

● Multi-Agent Transactions

● Aptos Fungible Asset Standard

Kyle Brown is CTO of Vertalo. ChainEnabled is the technical publication of the Vertalo engineering team.

^[1] Kyle Brown, “The Vertalo API Standard,” ChainEnabled by Vertalo, September 2023. https://chainenabled.io/p/the-vertalo-api-standard

^[2] Aptos Labs, “Aptos Technical White Paper,” Aptos Foundation. https://aptosfoundation.org/whitepaper

^[3] Dave Hendricks, “Is Asset Management the Killer App for Distributed Ledger Technology?,” ChainEnabled by Vertalo, November 2024. https://chainenabled.io/p/is-asset-management-the-killer-app

^[4] Blake Richman, “Distributed Ledger Technology Use Cases in Asset Management,” ChainEnabled by Vertalo, November 2023. https://chainenabled.io/p/distributed-ledger-technology-use

^[5] Naomi Miner, “Vertalo’s Digital Transfer Agent,” ChainEnabled by Vertalo, October 2023.

Chain-Enabled by Vertalo

Vertalo’s Digital Transfer Agent

Abstract…

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3 years ago · 1 like · Naomi Miner

^[6] Aptos Labs, “Move — A Web3 Language and Runtime,” Aptos Developer Documentation. https://aptos.dev/network/blockchain/move

^[7] Aptos Labs, “The Move Book,” Aptos Developer Documentation. https://aptos.dev/build/smart-contracts/book

^[8] Aptos Labs, “Move Prover Overview,” Aptos Developer Documentation. https://aptos.dev/build/smart-contracts/prover

^[9] Aptos Labs, “Move Specification Language,” Aptos Developer Documentation. https://aptos.dev/build/smart-contracts/prover/spec-lang

^[10] Avi Gelashvili et al., “Block-STM: Scaling Blockchain Execution by Turning Ordering Curse to a Performance Blessing,” arXiv:2203.06871, March 2022. https://arxiv.org/abs/2203.06871

^[11] Aptos Labs, “Aptos Blockchain Deep Dive,” Aptos Developer Documentation. https://aptos.dev/network/blockchain/

^[12] Aptos Labs, “Accounts,” Aptos Developer Documentation. https://aptos.dev/network/blockchain/accounts

^[13] Aptos Labs, “Account Key Rotation,” Aptos Developer Documentation. https://aptos.dev/build/guides/key-rotation

^[14] Aptos Labs, “Multi-Agent Transactions,” Aptos Developer Documentation. https://aptos.dev/build/sdks/ts-sdk/building-transactions/multi-agent-transactions

^[15] Aptos Labs, “Aptos Standards,” Aptos Developer Documentation. https://aptos.dev/build/smart-contracts

^[16] Aptos Labs, “Aptos Fungible Asset (FA) Standard,” Aptos Developer Documentation. https://aptos.dev/build/smart-contracts/fungible-asset

^[17] Aptos Labs, “Aptos Developer Documentation.”

https://aptos.dev

If you think you invested in Anthropic common stock when you bought tokenized shares from an SPV, you are probably going to get rekt.

And it doesn’t end with Anthropic.

That’s the short version of a much longer story, and the longer version starts with a tweet.

On May 21, 2026, SEC Commissioner Hester Peirce posted this on X: “I appreciate the interest in, but not the hyperbole about, the contemplated innovation exemption for the onchain trading of tokenized NMS stock. Keep in mind: I’ve always expected that it’d be limited in scope and would facilitate trading only of digital representations of the same underlying equity security that an investor could purchase in the secondary market today, not synthetics.”

View the original post.

The comments were full of confusion about the last two words. What is a “synthetic”? Why does it matter? How do you know if what you’re buying is one?

This piece is an attempt to answer those questions precisely, because the answer turns out to have a lot of money riding on it.

I should say upfront that I’m not a neutral observer. Vertalo issued the first Reg D tokenized equity RWA in March 2018 and built what became one of the first purpose-built digital transfer agent platforms, designed from the ground up to record security ownership on distributed ledger technology and to protect the rights and interests of both issuers and investors. We started in private markets, which is exactly the market Anthropic operates in, and the problems we were solving then are the same ones showing up in every synthetic tokenization structure today. Whether the issuer is a pre-IPO AI company, a SpaceX-scale private unicorn, or a currently-trading NMS listed stock, the recordkeeping architecture is the same and so is the failure mode. I provide services to issuers of securities. That’s my perspective, and you should factor it in.

A “synthetic” in Peirce’s context is any tokenized instrument that gives you economic exposure to a security without giving you actual ownership of it. What you hold instead is a claim against an intermediary: a fund, an SPV, a platform, a broker. The intermediary may hold the underlying security, or may have hedged its exposure to it, or may have done something else entirely. You won’t always know. What you do know is that your name is not on the issuer’s books, and the issuer has never acknowledged you as a shareholder.

The legal framework for this distinction is Article 8 of the Uniform Commercial Code, which has governed securities transfers in the United States since 1994. Under UCC §8-102, the law separates two fundamentally different ways of holding a security. A “direct holder” is someone whose ownership is recorded on the issuer’s books, no intermediary required. Everyone else is an “entitlement holder”: a person identified in the records of a securities intermediary as having a security entitlement against the intermediary. Not against the shares. Against the firm that’s holding them for you.

Most investors in traditional brokerage accounts are entitlement holders and don’t know it. Your broker holds a claim against its clearing firm, the clearing firm holds a claim against DTCC, and DTCC’s nominee entity, Cede & Co., is the legal owner of record for virtually every publicly traded U.S. share. It’s a four-layer chain of entitlements, and it mostly works because every participant in the chain is regulated, reconciled, and backstopped. But the architecture has a known failure mode: when the authority to create entitlements lives in the netting layer rather than the issuer’s own records, the total count of entitlements can exceed the total count of authorized shares. That’s exactly what happened during the GameStop episode in 2021, when short sellers had sold roughly 40% more shares than existed, because the entitlement system permits positions to accumulate before anyone is required to reconcile them against the issuer’s authorized count.

Synthetic tokenized securities recreate this same architecture on a new rail. An SPV acquires, or claims to acquire, a position in a private company. It then sells tokens representing economic interests in that position. Token buyers hold entitlements against the SPV. The SPV holds entitlements against its broker. The issuer’s cap table reflects none of this and was never consulted about any of it.

Anthropic just showed everyone how fast that structure fails.

On May 12, 2026, Anthropic published the following: “We do not permit special purpose vehicles to acquire Anthropic stock and any transfer of shares to an SPV are void under our transfer restrictions. Any sale or transfer of Anthropic stock, or any interest in Anthropic stock, offered by these firms is void and will not be recognized on our books and records.”

“Books and records.” “Void.” “Will not be recognized.” Tokens representing SPV claims on Anthropic dropped roughly 40% when that statement landed, not because the company’s value changed but because the market finally priced in what those investors had actually owned: a position at the bottom of an entitlement pyramid that the issuer just declared invalid. Platforms like Forge Global, Hiive, and Open Door Partners had built products on the premise that SPV exposure to Anthropic was the next best thing to owning Anthropic stock. Anthropic’s statement made clear that from the issuer’s perspective, those positions never existed.

That’s what Peirce means by “not synthetics.” A token representing your entitlement against an intermediary is not, in the eyes of the issuer or the law, the same thing as owning the security it references.

Robinhood’s tokenized stock products are a retail version of the same structure. OpenAI, SpaceX, and other companies whose equity Robinhood has offered as “tokenized” didn’t authorize any of it. OpenAI’s response was direct: “These ‘OpenAI tokens’ are not OpenAI equity. We did not partner with Robinhood, were not involved in this, and do not endorse it.” Retail investors buying these products are holding synthetic exposures, not equity. They are entitlement holders against Robinhood’s offshore entity, not shareholders of the underlying companies. Peirce’s innovation exemption, if it materializes, would explicitly exclude these products, and her May 21 tweet was a response to the enthusiasm around that exemption, enthusiasm that apparently assumed the exemption would bless a much wider range of instruments than she ever intended.

The structural fix to all of this is a transfer-agent-issued tokenized equity primitive, and I can say with some authority that it’s already technically possible, because Vertalo built it.

When an authorized transfer agent mints a token representing an issued share under the issuer’s explicit direction, that token IS the entry on the master securityholder file. There’s no securities intermediary in the chain. The token holder is a direct holder under the UCC, not an entitlement holder. Total token supply equals authorized, issued share count, enforced in code, auditable by the issuer and regulator in real time, and structurally incapable of exceeding the authorized cap. You cannot sell a share you don’t have when “having a share” means controlling a token on an immutable ledger reconciled against the issuer’s authorized count on every block.

This is what Peirce’s exemption is designed to facilitate, and it’s the architecture that makes the “not synthetics” boundary meaningful rather than rhetorical. A TA-minted NMS stock token is a digital representation of the same underlying equity security an investor could purchase in the secondary market today, because it IS that security. The transfer agent minted it. The issuer authorized it. The investor is on the issuer’s books.

That’s the opposite of a synthetic, and that distinction matters whether you’re an investor trying to avoid getting rekt or a regulator trying to write a rule that holds.

What Anthropic enforced defensively after the fact, what Peirce has been saying consistently for close to a year, and what the UCC has said since 1994 all point to the same conclusion: an entitlement against an intermediary is not ownership of a security, and any token that represents only the former will eventually be priced like it. The SEC’s rulemaking around onchain NMS equity is the opportunity to close that gap at the infrastructure level. The comment period is the industry’s chance to say so clearly enough that it shapes what actually gets built.

Investors should probably say something too.

Dave Hendricks is CEO and Founder of Vertalo, Co-Chair of the Securities Transfer Association’s Tokenization Committee, and Publisher of The Token Playbook, an independent RWA research and resource platform. Vertalo has been tokenizing real-world assets since March 2018 and operates one of the first fully integrated digital transfer agent platforms.

Further reading: - Is Asset Management the Killer App for Distributed Ledger Technology? : Dave Hendricks, ChainEnabled - Vertalo’s Digital Transfer Agent : Naomi Miner, ChainEnabled - SEC Commissioner Peirce, “Enchanting, but Not Magical,” July 9, 2025 - Anthropic warns investors against secondary platforms, TechCrunch, May 12, 2026 - UCC Article 8, §8-102, Definitions: “security entitlement,” “entitlement holder,” “securities intermediary”

The enterprise blockchain industry has been selling the same story to capital markets for over a decade. The problem with public blockchains, the story goes, is that anyone can join, even if it’s messy, pseudonymous, and with regulatory uncertainty baked in. The solution was a permissioned network: known participants, audited validators, a governance structure regulators can actually talk to. Essentially Compliance through Centralized Control.

That pitch worked well enough to get Goldman Sachs and Digital Asset to build Canton Network, Hedera Hashgraph to spend years signing enterprise brands onto its Governing Council, and R3’s Corda onto a dozen bank infrastructure roadmaps. But how are those bets looking with the recent Senate draft of the Clarity Act?

A little introduction: The Clarity Act, now moving toward Senate markup, is possibly the most consequential regulatory development this industry has encountered, because it picked the other side of that debate.

How We Got To This Point

The first generation of enterprise blockchain, roughly 2015 through 2020, ran on a simple premise: the SEC and banking regulators would never accept a public blockchain for regulated financial activity. The answer was to build the same ‘distributed’ ledger technology in a known-participant environment. If you could tell a regulator who every node operator was, what their identity verification looked like, and who could kick them off the network, you’d have something that felt like a financial institution.

In the Gensler-Warren-Chokepoint era that wasn’t crazy. It was a reasonable and risk-averse read of the regulatory environment at the time. The SEC was actively hostile to crypto, the CFTC was confused, and banking regulators were watching. And sometimes they did more than just watch.

But the permissioned blockchain narrative never resolved a core problem: if you know who every validator is, if they can all be removed, if the governance council decides who participates, you don’t actually have a blockchain in any meaningful sense. You have a semi-distributed database with a consensus mechanism. The token you issue on that database carries all the regulatory characteristics of a security, because the value of the token depends on the identifiable group running and governing the network. It’s not your older brother’s degen DLT.

For years, this didn’t matter in a legally concrete way. There was no clean statutory framework for what made something a commodity versus a security in the digital asset context. The SEC and CFTC fought over turf, the Howey Test got applied inconsistently, and everything sat in legal gray area, albeit backed by powerful financial firms that could afford to take on and maybe sway regulators.

With this latest - maybe suprising - recent draft, The Clarity Act ends that ambiguity, and where it lands is not good news for Canton or Hedera.

What the Act Actually Says

The Digital Asset Market Clarity Act (H.R. 3633), passed by the House 294-134 in July 2025 (but still in Senate Markup and Amendment before heading back to the House), creates a two-tier classification system for digital assets.

The central question: is a digital asset a “digital commodity” or a “digital asset security”?

The Act defines a “mature blockchain system” as “a blockchain system, together with its related digital commodity, that is not controlled by any person or group of persons under common control.” Once a blockchain system qualifies as mature, its native digital asset can qualify as a digital commodity and is regulated by the CFTC, tradeable on Digital Commodity Exchanges, and accessible without the full SEC securities registration stack.

That’s a pretty strong definition.

In plain terms: decentralization is a legal requirement for the most favorable regulatory treatment, not a philosophical preference. If your network is controlled by a consortium, a council, or a set of vetted validators who must be approved by existing insiders, your digital assets are securities.

What projects are most impacted by this?

Let’s start with the Canton Network: When “Invite Only” Is Your Business Model

Canton Network launched its mainnet in 2024 and, by its own description, is currently operating in an “invite-only phase.” Per Canton’s documentation, new validators and apps “need to first be approved following a request made by an existing super validator, validator, application provider or member of the Canton Foundation.”

Sounds like a members-only club, doesn’t it?

That is literal permission to participate in the network’s consensus layer, granted by existing insiders, with IP whitelisting required for validator nodes. Canton’s architecture describes data as “segmented and replicated only to those validators permissioned to view the data.” Canton’s privacy model is a genuine technical innovation, and it’s built on a foundation of permissioning that runs deep into the protocol.

Canton’s proponents argue this is a transitional phase. As more participants join and governance moves toward the Canton Foundation, the network will become progressively more decentralized. That may turn out to be right. The problem is that “we intend to decentralize eventually” does not equal “we are currently a mature blockchain system” under the Clarity Act’s definition. The Act’s maturity certification requires demonstrating that the network is not controlled by any person or group under common control, present tense. A network that requires sponsor approval for every new validator today does not meet that standard today.

For enterprises that have deployed asset tokenization on Canton: are those assets securities? And if they are, what does that mean for secondary market access, for the intermediaries involved, for the compliance burden on every transfer? Canton’s legal team and every Canton-deploying institution’s legal team should be working through those questions now.

Hedera’s Council Model: Governance as the Problem

Lesser known but around longer than Canton, Hedera is the OG Federated Network.

Hedera Hashgraph has always been transparent about its governance model, which is both admirable and clarifying. The Hedera Governing Council - currently comprising Google, IBM, Boeing, LG, and others - controls the network’s consensus nodes. Per Hedera’s own documentation: “The Hedera Mainnet is currently comprised of permissioned consensus nodes operated by the Hedera Governing Council.”

To run a consensus node on Hedera, you join the Governing Council. The Council controls consensus, network updates, and treasury. Hedera is now introducing “block nodes” as a permissionless participant type, which is a meaningful evolution, but block nodes don’t participate in consensus and don’t determine finality. The Governing Council retains control over the consensus mechanism.

Under the Clarity Act’s analysis, the Governing Council is almost certainly “a group of persons under common control” for purposes of the maturity test. It’s a defined membership set. It makes decisions by specified voting procedures. It has explicit authority over the network’s operation and code.

Hedera was built on an architectural premise - corporate council governance as the path to institutional acceptance - that is now in direct conflict with the legal framework that determines your assets’ regulatory classification. The council was supposed to be what made regulators comfortable. The Clarity Act looked at council-governed networks and put them on the wrong side of the commodity/security line.

Who wins in the new Draft? The Public Chain Argument Just Got Better

For years, public chain advocates in the RWA space had to win a qualitative argument: “yes, it’s Ethereum, but here’s why that’s fine for institutional use.” That required convincing skeptics case by case, without clear statutory backing.

The Clarity Act changes that public chain argument entirely, because it creates specific statutory benefits that flow to public chain tokenization and not to permissioned networks.

Section 202 provides a fundraising exemption from traditional securities registration for digital commodity issuers - those operating on networks that qualify as mature blockchain systems. The disclosure requirements are lighter than full registration, and permissioned network tokens can’t easily access this pathway because their underlying networks can’t certify maturity. Assets classified as digital commodities can trade on Digital Commodity Exchanges with commodity-framework compliance requirements, not the full securities intermediary registration stack required at every step for tokenized securities. The Act’s safe harbor provisions for noncustodial developers and validators apply specifically to decentralized networks, providing liability protection that simply doesn’t map to the vetted, known-participant validator sets on Canton or Hedera. And digital commodity trading moving under CFTC jurisdiction means cleaner regulatory relationships for intermediaries (the CFTC’s framework is mature and well-understood) while SEC securities regulation for tokenized assets is still being invented in real time.

The Deeper Problem: Gatekeeping Is Antithetical to the Value Proposition

Many see the value of tokenized assets in terms of the liquidity and market access they create. If you tokenize a real estate fund but can only trade it on a permissioned network where three administrators control who can participate, you haven’t solved the illiquidity problem. You’ve added technology to an already-gated system. You’ve traded one liquidity problem for another.

The permissioned blockchain pitch was always “we’ll handle the compliance, you’ll get the efficiency.” Efficiency without liquidity is just a faster database, and liquidity requires open market access, which requires open network access, which requires the kind of permissionless validator participation that Canton and Hedera in their current forms don’t provide.

The Clarity Act didn’t create this tension, instead it revealed what was already happening in the market. Ethereum-based RWA tokenization (Ondo Finance, Franklin Templeton’s onchain money market fund, BlackRock’s BUIDL) is growing faster than anything on enterprise permissioned chains. Public chain infrastructure is where actual adoption is happening, and the Act gives that momentum a legal tailwind that enterprise chains can’t match without fundamentally redesigning their architectures.

What Should Happen Now

For institutions that have deployed on Canton, Hedera, or similar permissioned networks: get a clear legal opinion on whether your assets are securities under the Clarity Act framework. Don’t assume the existing compliance posture carries forward. The maturity test is new, and its application to your specific network architecture needs fresh analysis.

For Canton and Hedera: the path forward, if they want to capture the benefits of the Act, is genuine architectural decentralization, effectively aspirational roadmaps, but actual permissionless validator admission. That’s a hard design problem to retrofit onto a network built around known-participant consensus, and it may not be achievable without breaking the privacy and composability features that make these networks attractive to institutional users.

For enterprises evaluating tokenization infrastructure in 2026: “Does this network architecture qualify as a mature blockchain system?” belongs right next to “what’s the TPS?” and “what’s the custody model?” on your checklist. The answer determines whether your tokenized assets are securities or commodities, and that distinction will shape your compliance costs, market access, and liquidity options for years.

The Final Boss

The enterprise blockchain industry made a bet. It bet that regulators would reward permissioning, that known-participant networks would earn the regulatory goodwill that messy public chains couldn’t. Looking backl, that was a reasonable bet in 2016, 2018, 2020, 2022, and even 2025 (as evidenced by the fundraising success of private-permissioned networks).

But The Clarity Act just scored it as a not-that-good-bet. A decade of enterprise blockchain architecture was optimized for the exact characteristic the Act now classifies as a securities liability. Canton and Hedera aren’t dead, but the cost-benefit analysis of building on them has changed materially, and anyone who deployed tokenized assets on those networks without a fresh Clarity Act legal opinion is already behind.

The public chains weren’t wrong about the fundamentals. They were just early, and harder to explain to a compliance officer in 2019. Now they have the statute on their side. I am fully expecting the Empire to Fight Back. Why wouldn’t they? But whose side will they be on?

I founded Vertalo in 2017 and after our pioneering and arguably first Reg D/S equity tokenization in March of 2018 I pivoted the company to become a ‘Digital Asset Data Management’ platform and purpose-built, API-first digital transfer agent.

With more than 9 years of experience tokenizing assets under my belt, and more than 20,000 client and partner calls and demos, I’ve learned a tremendous amount about how RWA and Securities Tokenization actually works in the real world, and what doesn’t.

I’ve been writing about this topic on ChainEnabled for several years now because I think the practitioners actually doing this work deserve better signal than what’s available. Most of what gets published in this space is either written for outsiders trying to understand the basics, or it’s marketing material dressed up as analysis.

The new resource and site that I built is based on a similar idea, but in the form of an independent informational platform instead of a Vertalo marketing newsletter. It’s called The Token Playbook, and it launched this week.

I want to be specific about what it is and who it’s for, because “another RWA resource” doesn’t do it justice. It’s not a price oracle, it’s not BCG/McKinsey/Accenture/Gartner paid consulting analysis, and it’s not biased.

What TTP actually does

The Registry is a structured directory of 500+ companies operating across the RWA and tokenization ecosystem, sorted by many dimensions including services offered, chain, jurisdiction, and function. Each entry links to the people, deals, and activity associated with that company. If you’re an issuer evaluating which transfer agents support your target chain, where to trade RWAs, an investor trying to understand who’s operating in a specific jurisdiction, or a lawyer trying to map the competitive field for a client, the Registry does that work without requiring you to assemble it from scratch. Companies that choose to sponsor the registry can upload documents, events, jobs, and more and because we have enabled AI-LLM search (but not scraping), updating your registry listing should make ex-TTP search more effective as well.

The Jobs Board tracks HUNDREDS of open roles across the ecosystem. You use it as a capital deployment signal - where companies are hiring tells you more about where real money is moving than any analyst report does. If you’re in the market, it’s obvious why it’s useful. If you’re not, it’s still one of the better leading indicators in the space.

The AI Advisor is built for the questions practitioners actually ask: how does ERC-3643 compare to DS Protocol for a Reg D offering, what does the SEC’s January 28 tokenization statement mean for my structure, which custodians are currently supporting Aptos-native assets. It’s not ChatGPT with a crypto prompt searching the same old sources, rather it’s trained on the regulatory record, the protocols, the SEC and CFTC output, and the actual infrastructure decisions that matter. TTP uses all of these reputable sources to drive higher quality inference, not just links.

The Book - at more than 1000 pages - is designed as a living wiki, not a static document I will update from time to time, but most importantly MEMBER contributions are a core part of how it works. If you’re a lawyer who has developed a specific view on how Model 3 tokenization structures survive a Howey analysis, or a builder who has actually deployed on multiple chains and has opinions about the operational differences, you can contribute that. Contributions go through editorial review, but the goal is for TTP to reflect the actual knowledge of the people doing this work, not just my own perspective.

The Events Calendar tracks what’s happening, when, and where (conferences, webinars, regulatory hearings, market-moving dates).

There is much more on the site, including a daily news digest, ‘The Big Story’, a ‘debate stage’ where the most engaged conversations on X.com are highlighted, and all of this can get sent to you via a daily email.

Who it’s for

If you’re issuing tokenized securities, TTP is where you find the service providers, understand the regulatory treatment across jurisdictions, and track the market structure you’re operating in.

If you’re investing in tokenized assets, it’s where you research the ecosystem, track jobs and capital flows as a leading indicator, and get a faster read on infrastructure and protocol decisions.

If you’re practicing securities law in this space, the Registry and the AI Advisor handle the research load that currently requires an associate and 3 hours of PDFs.

If you’re building protocol infrastructure, it’s where you track the regulatory record, understand where institutional adoption is actually happening, and find the service providers you need to integrate with.

If you’re a transfer agent, a custodian, a broker-dealer, or any other market structure participant, it’s where you track what’s changing, find partners, and understand where the market is going.

One thing I want to be clear about

This is a side project. Vertalo is a sponsor and appears in the Registry, but it doesn’t get special treatment and I don’t use TTP to pull punches for anyone -Vertalo included. When I write about transfer agents or the Coin Center letter or the DTC no-action guidance, I write what I think is accurate, not what’s convenient for my company. The same editorial standard that applies to ChainEnabled applies to TTP. That’s not a disclaimer; it’s the whole point.

The TTP platform works because it’s objective. If it starts gaming the system for any participant, it stops being useful to everyone else, and that defeats the purpose.

⸻

Start a 14-day free trial at the link below. No card required.

thetokenplaybook.com/signup

— Dave

In remarks at the Economic Club of Washington on April 22nd, SEC Chair Paul Atkins said the agency is “on the cusp” of releasing an “innovation exemption” that would let market participants begin facilitating trading of tokenized securities onchain while the Commission works on longer-term rules.

This should matter to anyone involved in any respect with ‘tokenized real world assets’ because it signals movement beyond speeches and theory toward a usable operating lane. While the remarks are meaningful, they aren’t presented in a vacuum, but as close observers may understand, they are part of rigorous and steady set of speeches, statements, and clarifications. These things take time, and they do take some talking through as well.

Grounding this speech with recent events
In March, Commissioner Hester Peirce said SEC staff was already working on a narrower exemption to support limited trading of certain tokenized securities, with explicit questions around disclosure, atomic settlement, intermediary definitions, and how to avoid regulatory arbitrage.

A few weeks later, Trading and Markets Director Jamie Selway said the Division was actively preparing an innovation exemption recommendation for the Commission to allow certain trading venues to trade tokenized securities.

The broader policy stack is getting clearer too. On January 28th, SEC staff published a detailed statement on tokenized securities that drew a sharp line between issuer-sponsored tokenized securities, custodial tokenized securities, and synthetic tokenized securities. That taxonomy is critical because the market has spent too long blurring very different structures under one label. Breaking them down into a coherent taxonomy was an important structural step.

What should the industry watch next?
For starts, look at the scope. The language coming from the SEC suggests a controlled pilot, not a free-for-all. Second, consider ‘market structure’. The hard questions are not about marketing tokenization, but rather focus on

1. Transfer restrictions (something that Vertalo has pioneered for tokenized assets since 2018)

2. Investor protections (tokenized cap tables and asset databases are auditable)

3. Settlement mechanics (is t-0 really a good thing?)

4. Custody (most custodians digital or traditional cannot handle the more complicated equity tokenization standards, at all)

5. Where existing broker-dealer, exchange, and clearing rules fit or fail.

If the exemption lands well, firms that already understand compliant issuance, cap tables, transfer-agent workflows, and permissioned trading mechanics will move first.

The take-away simple: this is not final clarity, but it is the closest the SEC has come to opening a serious onchain path for tokenized securities trading in the US.

Want source material for your own reading? Look below.

Relevant links:

• SEC Chair Paul Atkins remarks: https://www.sec.gov/newsroom/speeches-statements/atkins-keynote-remarks-economic-club-washington-042126

• Commissioner Hester Peirce remarks: https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-iac-031226

• Erik Selway remarks: https://www.sec.gov/newsroom/speeches-statements/selway-remarks-stany-conference-041326

• SEC staff statement on tokenized securities: https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826-statement-tokenized-securities

• Cointelegraph coverage: https://cointelegraph.com/news/sec-tokenized-securities-exemption-nears-release

In her March 16 statement supporting proposed amendments to Rule 15c2-11, she calls the SEC’s post-2020 handling of the rule a bureaucratic mess of the agency’s own making. Yep. Checks out!

The Reader’s Digest Version: Rule 15c2-11 governs what information broker-dealers must verify before quoting a security on OTC markets.

The 2020 amendments updated the rule but left its scope ambiguous. Suddenly the fixed income market was asking whether the rule applied to bonds, and years of no-action letters, temporary relief, and general confusion followed (not to mention legal fees and wasted time).

Now the SEC is proposing to clarify the rule applies only to equity securities, and Peirce is openly inviting comment on 3 specific questions: 1) how “equity security” gets defined, 2) whether and how the rule reaches crypto assets, and 3) what an “expert market” for digital asset securities might look like.

That last one matters most for this audience. What exactly is ‘an expert market’?

The “expert market” concept isn’t new, but its application to digital assets is. The idea is a tiered access structure where unregistered securities can trade among sophisticated parties, without the full issuer disclosure requirements triggered by retail-accessible quoting. Think of it as a regulatory carve-out for informed participants, one that could meaningfully reduce the compliance cost of OTC quoting for tokenized instruments that don’t fit neatly into existing frameworks.

The Whole Statement can be found here.

Here's where it gets practical. If the SEC extends Rule 15c2-11's reach to tokenized or crypto securities quoted on OTC venues, broker-dealers won't just need issuer disclosures, they'll need verified, current ownership and issuance records.

The rule's information requirements point directly upstream to whoever holds the canonical record of who owns what.

That's the transfer agent's job and always has been. Vertalo was built for this inevitability.

The OTC quoting process for any security sits downstream of the cap table. Before a broker-dealer can publish a quote, someone has to have already recorded the issuance, tracked the holders, and maintained the documentation that satisfies "current public information" requirements.

For tokenized securities, that record is on-chain and held by a registered transfer agent. The SEC is drafting rules around a data infrastructure that already exists.

Commissioner Peirce is drawing the regulatory map: Transfer agents are landmarks on it, not footnotes.

The comment period on these proposed amendments is the real opportunity here. If firms building tokenized issuance infrastructure have views on how "equity security" should be defined, or how an expert market for digital assets should be structured, now's the time to write them down and submit them.

The SEC said it wants to hear from you, loyal reader. What's your read: does the "expert market" concept give tokenized securities the right runway, or does it create a two-tier system that the next administration will spend years untangling?

If you’re interested in learning more about the role of a truly-integrated digital transfer agent, reach out to me at Dave.Hendricks@vertalo.ai

6 questions. That's what she put to the Committee. And if you know how to read regulatory signal, those 6 questions are a roadmap.

Have questions about what this means for your securities? Visit Vertalo.ai and ask our chatbot. It's trained on every SEC statement, FAQ, and regulatory development in the tokenization space.

I've been building tokenization infrastructure for 8 years. I watched the Jan 28, 2026 SEC Joint Statement on Securities Tokenization confirm that tokenized securities on DLT are legal. That was the "is it legal?" question, and the answer was yes. Peirce's March 12 remarks shift the conversation entirely. We're now in "how do we build the sandbox?" territory.

Personally, 8 years after we (Vertalo) issued our own Tokenized Reg D/S Vertalo Talos Equity, I’m kind of past the Sandbox phase, but sounds good to me versus the quicksand that was the Gensler SEC!

And I am ecstatic that we are not a Broker-Dealer. Read down to understand why.

Commissioner Peirces 6 Questions - Unwrapped

1. Are existing disclosure requirements already sufficient? The IAC draft called for mandatory disclosures giving tokenized security investors a clear picture of ownership rights. Peirce asked: what exactly is missing from the SEC's existing issuer disclosure framework?

If you can't answer that, maybe nothing's missing.

2. Do broker-dealers and clearing agencies need new disclosure rules when they tokenize security entitlements? She asked why tokenized entitlements should be treated differently than non-tokenized ones.

The implied answer: they probably shouldn't be.

3. Why would atomic settlement need exemptive relief from T+1? This is one of the 2 most important questions. The IAC draft said atomic settlement requires relief from T+1 rules. Peirce's response: atomic settlement is faster than T+1.

Why would you need a waiver to settle faster? She also asked whether atomic settlement would face friction under other existing SEC rules beyond T+1.

4. What happens when there are no intermediaries? This is the other most important question. The IAC assumed tokenized equity trading would have intermediaries subject to best-execution protections. Peirce asked what happens when there are no intermediaries, or when the intermediaries don't fit existing Exchange Act definitions (broker, dealer, exchange, clearing agency).

Does the SEC even have statutory authority to regulate those entities? That question cuts deep.

5. Should the exemption allow multiple tokenization models? The Jan 28 statement identified 5 distinct tokenization models. Peirce asked whether the innovation exemption should allow different models to coexist so the SEC can learn about each one's risks and benefits.

She also asked whether issuers should have to consent before someone creates a tokenized version of their existing securities.

6. What guardrails prevent regulatory arbitrage? Standard caution, but real. What conditions preserve fundamental investor protections without creating a regime so narrow it teaches us nothing?

What Narrowed, What Broadened, What Got Clarified

Narrowed: The exemption itself. The IAC draft floated a blanket exemption. Peirce walked that back immediately. "Much narrower" means targeted, limited, and probably scoped to specific security types or transaction structures.

Broadened: The analytical frame. Questions 3 and 4 open up existential questions about whether traditional market structure even applies to DLT-native settlement. That's a much bigger intellectual space than the IAC was working in.

Clarified: The disclosure burden on issuers. Questions 1 and 2 strongly suggest existing rules may already be sufficient. Issuers don't appear to be facing a new disclosure regime on top of what they already file.

What to Do Right Now, by Audience

Issuers: The exemption is coming. Start the tokenization conversation with your transfer agent now. Based on Questions 1 and 2, existing disclosure requirements likely apply, which means your compliance overhead may be lower than you think. Early movers set the terms.

Investors: The SEC's questions confirm it's building equivalent protections for tokenized securities, not a separate weaker regime. Question 6 is the guardrails question, and Peirce is asking it seriously.

Transfer Agents: Commissioner Uyeda told you on Feb 9 to modernize via DLT. Peirce's Question 5 means the SEC wants platforms that can handle multiple tokenization models. Single-model TAs will not be sufficient. I've written about what DLT means for transfer agent infrastructure and the pressure to modernize is now coming from 2 commissioners.

Broker-Dealers: Question 4 is a direct challenge to your business model. DLT-native settlement may eliminate the intermediary entirely. If you can't operate in a world without traditional broker-dealer definitions, you need to start building or partnering with infrastructure that can. I've covered whether asset management is the killer app for tokenization, and the answer depends on who controls the rails.

The Vertalo Securities Protocol was built to support all 5 tokenization models the SEC identified in January. That wasn't an accident.

Source: Peirce, H. (2026, March 12). Adam's Lib: Remarks at the Meeting of the SEC Investor Advisory Committee. U.S. Securities and Exchange Commission. https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-iac-031226

If you’ve read this far and want to ask Vertalo’s authoritative chatbot questions about Securities Tokenization, Transfer Agency, Regulations, or best practices, click here!

Anyone who's tried to issue or trade tokenized assets has run into this problem firsthand. The "is this a security or a commodity?" question was never academic; it determined which regulatory regime applied, what compliance infrastructure you needed, and which agency you had to satisfy first. The two agencies didn't coordinate well on the boundary cases for years, and that grey zone was expensive in both time and money.

The framing coming out of Project Crypto is "minimum effective dose" regulation, phased rollout, no piling new rules on top of old ones. Both chairs came back repeatedly to competitiveness as a motivation, keeping this market onshore rather than watching it develop in other jurisdictions. On March 10, Selig told the FIA conference that the inter-agency friction is behind them (see CoinDesk) and added that the CFTC is expanding the types of tokenized collateral eligible for margin and clearing purposes. That's a concrete operational change to market infrastructure, not a restatement of intent.

On the legislative side, the CLARITY Act is working its way through Congress with the goal of codifying these jurisdictional lines. If it passes, the taxonomy stops being agency guidance and becomes law.

The day before the Project Crypto event, on January 28, the SEC released its Statement on Tokenized Securities (which I covered in detail here), outlining 5 distinct models for how a security can exist on-chain within the current regulatory framework. The models range from a traditional book-entry security with a blockchain layer attached all the way to fully on-chain issuance, and each maps to a specific place in the SEC's existing rules. Chair Atkins' ETHDenver remarks (covered here) and Commissioner Uyeda's related statements (covered here) fill in useful context on the direction this is all heading.

For issuers, having 5 defined models means the compliance question now has more than one answer. The right model depends on your structure, your investors, and how you want the asset to function on-chain. Vertalo has been an SEC-registered transfer agent since 2019 and has worked with over 100 issuers and 100,000 investors across this space. We've worked through all 5 models in detail. If you're sorting out which approach fits your situation, we're glad to talk it through.

If you’re waiting for clarity before making infrastructure decisions, you’re already behind.

The White House Submission (March 3, 2026)

On March 3, the SEC submitted an interpretive framework to the White House for interagency review at the Office of Information and Regulatory Affairs (OIRA).

The framework may introduce a token taxonomy — a classification system for determining which digital assets qualify as securities under U.S. law. That distinction shapes everything: registration requirements, disclosure obligations, how firms interact with investors.

Here’s the part that matters for legal weight. A commission-level interpretation carries stronger authority than staff guidance and doesn’t require a formal vote. Chair Atkins is moving this forward without waiting for Congress, where broader crypto legislation remains stalled.

This follows his appearance at ETHDenver on February 18, where Atkins floated the idea of an innovation exemption for tokenized securities trading. We covered the transfer agent implications of that speech here.

The framework is now in interagency review. Watch OIRA.

The IAC Draft Recommendations (February 26, 2026)

Five days earlier, the SEC’s Investor Advisory Committee published draft recommendations on tokenized equity securities, prepared for discussion at the March 12, 2026 IAC meeting.

This is a substantive document. Read it. Here’s what it says.

Securities Law Applies. Full Stop.

Tokenized equity securities are crypto assets that meet the definition of a “security” under federal law. Every existing securities rule applies. No carve-outs, no special category, no fresh start.

Native vs. Wrapped: The Distinction That Determines Your Rights

The IAC draws a sharp line between 2 types of tokenized equity:

· Native tokens: Issued directly on a blockchain. The token is the equity security.

· Wrapped tokens: The underlying security is custodied. A token represents an interest in that custodied position.

If you hold a wrapped token issued by a third party unaffiliated with the issuer, you may lack voting rights, dividend rights, and pari passu status in bankruptcy. That’s not a footnote — that’s the core risk the committee is flagging.

Commissioner Uyeda made related points about ownership rights back in February.

Transfer Agents Are Named Critical Infrastructure

The IAC explicitly identifies transfer agents as one of the multiple counterparties in the settlement process. Anonymous trading would, in their words, “pose challenges to issuers and transfer agents in reaching shareholders” for corporate actions and quorum.

The committee isn’t treating the transfer agent as a relic. They’re treating it as load-bearing.

Mandatory Disclosures, Filed on EDGAR

Issuers of tokenized equity must provide investors with a clear disclosure document covering:

· Whether the token carries the same ownership rights as traditional shares

· Voting rights

· Dividend entitlement

· Pari passu status in corporate actions (splits, M&A, spinoffs, bankruptcy)

· The legal arrangement governing the token

· Identity of parties involved

· Infrastructure and transferability restrictions

These disclosures get filed on EDGAR and posted on the issuer’s website. No exceptions for new technology.

KYC, Modernized

KYC requirements stay. But the IAC acknowledges they don’t need to work the way they work today. Cryptographic credentials attached to digital wallets, verified once and reused across services, could streamline the process while preserving the substance. That’s a meaningful opening.

No Blanket Innovation Exemption

Atkins mentioned an innovation exemption at ETHDenver. The IAC just put a fence around it. Their position: narrow exemptions only, with full public notice and comment. Rule-by-rule reform is fine. A blanket waiver of investor protections is not on the table.

The committee also asks the SEC to publicly assess costs and benefits before implementing reforms. That’s a speed bump, but it’s a reasonable one.

Reg NMS Principles Apply to Tokenized Markets

Order protection, fair access, minimum price increments, execution quality reporting. All of it carries over. DeFi trading that bypasses intermediaries could strip investors of best execution protections and post-trade transparency. The IAC flags this directly and says the fundamental goals of Reg NMS can’t be compromised, even as specific rules may get revisited for blockchain-native contexts.

The ADR/VIE Warning

Here’s the most pointed warning in the document: failure to mandate adequate disclosure could create a market analogous to ADRs tied to Chinese companies using Variable Interest Entity structures — where investors hold economic exposure but lack clear, direct legal ownership in the underlying company.

The committee isn’t being abstract. They’re naming a known failure mode.

The Chamath Connection

Chamath Palihapitiya published a detailed piece on equity tokenization that’s worth reading alongside the IAC draft. He covers $150T+ in global equity markets, 3.5x growth in equity token market cap since the start of 2025, and 3 gaps tokenization solves: 24/7 trading, direct ownership, and broader access.

But his central problem statement lands differently after reading the IAC document.

“What a token represents is not always standardized.”

Chamath notes that different issuers design tokens with materially different economic rights. Many tokenized products deliver economic exposure rather than direct ownership. Robinhood’s OpenAI and SpaceX tokens, for example, don’t convey direct ownership — they’re synthetic exposure through SPVs.

90% of Americans say they’re willing to allocate retirement savings to private assets. Most of them don’t know what they’d actually own.

The IAC’s mandatory disclosure framework is a direct response to exactly this problem. The ADR/VIE warning is the cautionary version of the Robinhood token story.

Chamath identifies the gap. The IAC recommendations are the attempt to close it.

Where Vertalo Fits

Vertalo has been an SEC-registered transfer agent since 2019, built from the start to handle both traditional (digital dematerialized) AND tokenized securities in the same cap table.

The IAC draft validates Vertalo’s entire thesis. Transfer agents are critical infrastructure. Disclosure matters. Intermediary oversight is non-negotiable. The ability to manage native and wrapped tokens alongside traditional records isn’t a future feature — it’s the current product.

Vertalo supports all 5 SEC-recognized tokenization models from the January 28, 2026 statement. The platform runs across 4 chains (Ethereum, Aptos, Tezos, Private), serves 100+ issuers, 100K+ investors, and 300K+ securities lots across 6 countries, with 200+ GraphQL endpoints and an API-first architecture.

For firms concerned about counterparty data risk, Vertalo is designed for private/dedicated deployment — client data stays on client infrastructure.

The business model matters too. Software license pricing (no BPS fees, predictable cost structure). No investment products on own account, which means no moral hazard when advising clients. 3 engagement models: Sub-TA, Licensed Platform, and TA of Record.

Read more about Vertalo’s digital transfer agent infrastructure here.

What This Means

The buildout is accelerating on every front simultaneously.

DTC’s no-action letter from December 11, 2025 puts a tokenization pilot on the calendar for H2 2026. Nasdaq and NYSE are both proposing tokenized securities trading platforms. NYSE has started naming “digital transfer agents” in its proposals — a category that didn’t exist in the public vocabulary 18 months ago.

The IAC draft goes to discussion on March 12. The White House framework is in OIRA review now. Chair Atkins is moving the commission-level interpretation forward without waiting for Congress.

The firms that have regulatory-grade infrastructure in place when the market opens capture the market. The firms still in planning mode when the DTC pilot launches are playing catch-up in a game that doesn’t wait.

Read the Sources

· IAC Draft Recommendations on Tokenized Equity Securities (Feb 26, 2026)

· SEC Sends Crypto Securities Framework to White House (March 3, 2026)

· Chamath: Equity Tokenization

· SEC Jan 28 Statement on Tokenized Securities (5 Models)

· Commissioner Uyeda’s Remarks (Feb 9, 2026)

· Chair Atkins, ETHDenver, and Transfer Agents

Dave Hendricks is the CEO of Vertalo, a digital asset infrastructure company focused on regulated securities tokenization. ChainEnabled covers the intersection of blockchain, regulation, and institutional finance.

Where securities regulation meets Tokenization and Transfer Agency. By the team at Vertalo.

As an SEC-registered transfer agent since 2019, purpose-built from the ground up to handle and straddle the divide between ‘digital dematerialized’ and ‘tokenized’ assets, I’m happy that Vertalo stuck to its knitting and built what we did: A Digital Asset Data Management Platform that offers transfer agency and tokenization to issuers and investors, when and how they want it.

Chairman Atkins highlighted his understanding of the gap between ‘what and how’ in this one passage from his speech:

Specifically, I would like to consider how issuers that want to tokenize their securities could work with a transfer agent or other tokenization agent to tokenize their securities so that they can be traded onchain in AMMs or other trading systems, environments, or platforms that offer decentralized liquidity. Under this possible approach, the innovation exemption would limit trading volume and could provide relief from some of our rules and certain other requirements that may not be relevant in light of how this technology works. Buyers and sellers of the tokenized securities would go through a white-listing process. The exemption would be temporary but would last long enough for us to consider developing new rules and amending existing rules to allow such trading to continue under appropriate conditions in the future and to enable any parties that need to do so to register. I would certainly welcome feedback on this potential approach.

Vertalo’s platform is built to accommodate this kind of experimentation. Out of the box, by default.

The rest of their tag-team speech can be found in its entirety below.

If you want to talk about this, please reach out to info@vertalo.com or visit Vertalo.ai

Number Go Down and Other Schadenfreude

Paul S. Atkins, Chairman

Commissioner Hester M. Peirce

ETHDenver

Denver, CO

Feb. 18, 2026

Commissioner Peirce: I am honored to be on stage today with Chairman Paul Atkins. Before we begin, let me remind you that my statements and his are our own in our official capacities and do not necessarily reflect the views of the Commission or our fellow Commissioner. Chairman Atkins needs little introduction, but let me give you a brief bio for him.

Paul S. Atkins was sworn into office as the 34th Chairman of the Securities and Exchange Commission on April 21 of last year. Prior to returning to the SEC, Chairman Atkins was most recently chief executive of Patomak Global Partners, a consulting firm he founded in 2009. Chairman Atkins previously served as a Commissioner of the SEC from 2002 to 2008. During his tenure, he advocated for transparency, consistency, and the use of cost-benefit analysis at the agency. Chairman Atkins began his career as a lawyer in New York, focusing on a wide range of corporate transactions for U.S. and foreign clients, including public and private securities offerings and mergers and acquisitions. He was resident for 2½ years in his firm’s Paris office and admitted as conseil juridique in France. A member of the New York and Florida bars, Chairman Atkins received his J.D. from Vanderbilt University School of Law and his A.B., Phi Beta Kappa, from Wofford College in 1980. Originally from Lillington, North Carolina, Chairman Atkins grew up in Tampa, Florida. He and his wife Sarah have three sons.

One other interesting fact about Chairman Atkins is that he speaks German and French fluently. He likely is looking for another language to add to his repertoire. Mr. Chairman, have you considered learning Solidity?

Chairman Atkins: No need. Vibe coding works just fine. It is a big step up from the BASIC-PLUS and COBOL I used in college.

Commissioner Peirce: Fair point, Mr. Chairman, but if the smart contract your AI writes starts saying everything is a security, we’ll suspect AI hallucination. A few years ago, if someone had told me that I would be standing at a crypto conference with the Chairman of the SEC, I would have thought that person was hallucinating. But we’re here, so let’s get to some substance. During the past year, the SEC under the leadership of Chairman Atkins and Acting Chairman Uyeda in the early part of the year has taken a lot of steps toward crypto clarity. We have:

• Sought and received written responses to multiple sets of difficult questions covering a wide range of crypto topics;

• Held several in-depth roundtables on discrete topics including the definition of a security, trading, custody, tokenization, DeFi, and privacy;

• Met with many developers and builders in Washington D.C., virtually, and in crypto-on-the-road meetings in cities across the country;

• Provided technical assistance to Congress as it works on crypto legislation;

• Launched a new initiative with the Commodity Futures Trading Commission (CFTC) to build a lasting basis for coordination and cooperation in regulating areas of joint interest, including crypto;

• Ended regulation by enforcement;

• Issued multiple staff guidance documents and frequently asked questions to help people understand what the SEC staff thinks is and is not within the SEC’s jurisdiction (including on issues like mining, staking, meme coins, and stable coins), and how regulated entities engaging with crypto can comply with our existing rules;

• Got rid of unhelpful staff guidance, such as SAB 121;

• Published a staff statement on the custody of crypto asset securities by broker-dealers;

• Issued a cross-divisional staff statement outlining a taxonomy for tokenized securities;

• Approved exchange generic listing standards for crypto ETPs;

• Issued staff no-action letters to several projects, including on tokenization and DePIN; and

• Began the process of designing rules, exemptive relief, and Commission interpretations, which will help to form the basis for a durable regulatory framework.

Mr. Chairman, can you give us a preview of what to expect this year on the crypto regulatory front?

Chairman Atkins: We have a lot on our plate. Not only will we continue to engage with Congress on its important efforts, but, as you noted, we will move forward with our regulatory work through Project Crypto, which is now a joint initiative with the CFTC. As you all know, one of our own, Mike Selig, whom Hester brought to the SEC as Chief Counsel of the Crypto Task Force in my office, is now CFTC Chairman. We are planning great things together – harmonization, joint rulemaking – a common, coordinated approach unlike anything seen before at these two, often sparring agencies. As for the SEC, I expect the Commission and staff to consider the following in the coming weeks and months:

• A Commission framework to explain how we think about crypto assets that are subject to an investment contract. How is such an investment contract formed? And how is it terminated?;

• An innovation exemption to facilitate limited trading of certain tokenized securities on novel platforms with an eye toward developing a long-term regulatory framework;

• A rulemaking proposal to establish common-sense pathways for people to raise capital in connection with the sale of crypto assets;

• No-action letters and exemptive orders to provide additional clarity, including to address wallets and other user interfaces that are not subject to registration under the Exchange Act;

• Rulemaking on custody of non-security crypto assets, including payment stablecoins, by broker-dealers;

• A transfer agent modernization rulemaking which will accommodate the role that blockchain can play in recordkeeping; and

• Additional guidance and no-action letters to help people understand how existing rules apply to their unique factual circumstances.

Commissioner Peirce: Sounds like a lot of work, but for securities nerds like us, this experience is a bit like the Olympics. It’s nearly as exhilarating as hurtling downhill at 80 mph and doing acrobatics after getting big air off the ski jump or doing backflips after a quadruple lutz on ice. While not as dramatic as our talented Olympic champions, we have an unusual opportunity to consider many complex regulatory issues in light of this new technology. This task too will require some acrobatics, and we are not looking to hurt or break anything other than unwarranted regulatory impediments to technological progress.

I want to talk for a minute about an innovation exemption, which has inspired hopes and fears that may need some moderation. Indeed, the way people talk about it now reminds me of the expectations that people have when they buy an abandoned storage unit; they are sure it will contain a rare work of art and a trunk full of gold bars. So too some people are certain the innovation exemption will cure all their regulatory headaches. Some people in TradFi, by contrast, seem to think that the soon-to-be-opened storage unit contains a monster that will swallow all of TradFi in one ugly bite. They fear the innovation exemption will let crypto firms ignore all the rules. Both groups are likely to realize that the innovation exemption is not as monumental as either faction anticipated. It would be an important step toward facilitating the integration of tokenized securities into our existing financial system, but it would not change the entire financial system overnight. We are working incrementally now, as we have always done. The goal is to facilitate the organic incorporation of new technology in a way that enhances the dynamism and resilience of the system so that it can serve investors, companies, and other users of capital effectively. Paul, please describe what you have in mind with the innovation exemption.

Chairman Atkins: I would like to consider an innovation exemption to enable TradFi incumbents and crypto-native firms to experiment. For example, people trading certain tokenized securities through automated market makers, even though no one person or group of persons may be controlling that mechanism. In my view, market participants should be able to engage with decentralized applications on public, permissionless blockchains if they desire. But I expect that many Americans will be more comfortable allowing intermediaries to custody and trade on their behalf. Individual investors, not the SEC, should make the decision. I also would like to consider whether there should be a safe harbor for participants who may be facilitating such trading.

Specifically, I would like to consider how issuers that want to tokenize their securities could work with a transfer agent or other tokenization agent to tokenize their securities so that they can be traded onchain in AMMs or other trading systems, environments, or platforms that offer decentralized liquidity. Under this possible approach, the innovation exemption would limit trading volume and could provide relief from some of our rules and certain other requirements that may not be relevant in light of how this technology works. Buyers and sellers of the tokenized securities would go through a white-listing process. The exemption would be temporary but would last long enough for us to consider developing new rules and amending existing rules to allow such trading to continue under appropriate conditions in the future and to enable any parties that need to do so to register. I would certainly welcome feedback on this potential approach.

Commissioner Peirce: Thanks for giving us a peek into the storage locker. No Picassos, but no scary monsters either. Just an incremental step from which market participants can learn and which may help get us to a fit-for-purpose, long-term regulatory framework. Speaking of new things, you and I have both seen some demos to show us how some of this technology, such as decentralized trading, works. Has anything struck you about what you’ve seen?

Chairman Atkins: One interesting aspect of the technology is the ability to embed compliance into the smart contract’s code. A company’s founders, for example, could code their commitment not to resell their securities for a certain period of time into the smart contract governing tokenized securities. Likewise, we can reimagine communications between issuers and their security-holders through the use of blockchain. And privacy-preserving technologies, such as zero-knowledge proofs, can revolutionize how we achieve the goals of the Bank Secrecy Act. Under this model, Americans would not have to relinquish their privacy wholesale to financial institutions, and these intermediaries would have lower compliance costs.

Commissioner Peirce: That sounds promising. I worry a lot about how embedded financial surveillance is in our financial system. Americans have an opportunity to use this new technology to protect themselves from bad actors while also protecting our nation from our adversaries. We should take advantage of this moment to reacquaint ourselves with how important financial privacy is to the security of the American people.

Now let’s address the elephant in the room: what do you think about the falling crypto prices of late? Is it time to focus our attention on this issue? Should regulators panic or even care that prices are down?

Chairman Atkins: It is not the regulator’s job to worry about the daily swings of the markets; it’s our job to make sure market participants have the disclosures they need to make informed investment decisions. People whose only focus is on the number always going up are likely to be disappointed, whether they are buying stocks, precious metals, or crypto. Markets go up and markets go down in response to many factors. As regulators, the best thing we can do is to ensure that the rules governing the asset classes we regulate enable people to have the information they need to express their market sentiments through decisions about whether to buy, sell, or hold the assets at issue.

Commissioner Peirce: I agree. “Number go down” is the mantra of the moment, and some crypto critics are dancing in the streets. In German, we would call this reaction “Schadenfreude,” which translates as something like “happiness about destruction.” In this context maybe we should call their attitude Ethbelowthreeglee or Bitcoinunderseventylevity. But the best way to respond to these critics is not to look around desperately for some regulatory change that will cause the number to go up again. Sure, regulatory clarity in the form of legislation and regulation can help to create a conducive environment for building. But regulation is not the well from which value springs. You have to build stuff that people want and need. That is the best way to garner support on both sides of the aisle in Washington. If people are actually using something, government will be reluctant to take it away. Mr. Chairman, can you share some lessons from your many years of working in the capital markets about how innovators can successfully engage with the regulatory system?

Chairman Atkins: I agree with you that building useful things that people want and need speaks volumes in Washington. This technology, if developed carefully, could have a transformative effect on the financial system as securities move onchain. Tokenization could transform the financial system as we know it by, for example, shortening settlement cycles, facilitating the movement of collateral and dividends, facilitating proxy voting, or making it easier for people to construct and manage bespoke, diversified portfolios of investments. We stand ready to work with entrepreneurs who are building for a better future.

I hate to repeat an oft-mocked phrase from the last administration, but “Come in and talk to us.” We will not put our thumbs on the scale in favor of any particular asset or technology, nor will we become your spokesmen, but we want our markets to be open to people offering new products and services. Our rulebook should not be the barrier to innovation, but should further our objectives of protecting investors, facilitating capital formation, and fostering fair, orderly, and efficient markets.

Commissioner Peirce: You have captured the balance well. We are not cheerleaders of any new asset or technology, but we want our markets to welcome people who have ideas about how to improve them. The SEC has not always been very welcoming. Regulation, if done wrong, can deny the American people benefits they otherwise would enjoy. For example, an unwillingness to work productively with issuers of tokens led to the perverse result that tokens that gave no meaningful rights to their holders were less likely to attract negative regulatory attention than rights-bearing tokens. As a result, we now live in a world in which most tokens do not give their owners any rights. I would like to get to a place in which project developers would not fear to create tokens that carry some claim on revenue streams and thus are securities. Paul, what would it take to get to a place where people would create tokens that fall unashamedly into the securities bucket?

Chairman Atkins: We need to continue doing what we are doing—providing clarity about how tokenized securities interact with existing regulation and how intermediaries dealing with tokenized securities can trade and custody them on behalf of their clients. This work can only be done in a collaborative fashion, and we welcome input from everyone, even crypto naysayers who are fully immersed in their Schadenfreude. I encourage people in the audience to think about what attributes a token should have to make it useful to people, and then work with us on a regulatory framework that accommodates these attributes without compromising our important regulatory objectives. But this process will take time, and innovators shouldn’t necessarily wait for these changes before they start building. While we have these bigger conversations about whether fundamental changes should be made to our rulebooks, talking to us to see if there’s a way to make the current rules work under your particular facts and circumstances may be a necessary interim step.

Commissioner Peirce: Paul, you’re known for your good cheer even in the face of difficult circumstances. Any words of advice in closing for an audience that is in the throes of a challenging crypto market?

Chairman Atkins: Put your nose to the grindstone and work to build things that matter. That is how you transform Schadenfreude to Freudenfreude – the sense of happiness we feel when others succeed. A little dark chocolate and Diet Coke might help too, but go easy on the Celsius and Zyn.

Commissioner Peirce: Thank you, Paul.

Last Reviewed or Updated: Feb. 19, 2026

Remarks at the Asset Management Derivatives Forum 2026: Treasuries and Tokenization

Commissioner Mark T. Uyeda

Austin, Texas

Feb. 9, 2026

Good morning and thank you, Lindsey [Keljo], for the introduction.[1] I appreciate the turnout—early on a Monday morning—the day after the Super Bowl. For those folks in this room, I know that you find topics like Treasury clearing and tokenizing the securities markets as important as slot formations and nickel coverages. Thus, my remarks will focus on the current status of the SEC’s efforts to implement the Treasury Clearing Rule[2] and facilitate tokenization of the securities markets.

I. Treasury Clearing Update

The U.S. Treasury market remains the cornerstone of global financial stability, supporting everything from mortgage pricing to corporate financing to central bank reserves. With nearly $29 trillion in marketable Treasury debt,[3] it is the deepest and most liquid capital market in the world. Its smooth functioning depends on the coordinated efforts of countless stakeholders—including market participants, clearing agencies, infrastructure providers, and other regulators.

I first became involved in discussions regarding the potential mandatory clearing of Treasuries when I served on detail to the U.S. Department of the Treasury in 2017. Eventually, there would be widespread consensus with respect to the benefits of mandatory Treasury clearing. Using a central counterparty can improve transparency and reduce bilateral exposures. The ability to use netting for offsetting transactions can free up additional cash for market participants, which in turn can reduce liquidity strains. Accordingly, in December 2023, I voted with a majority of SEC Commissioners to adopt standards to mandate central clearing of Treasury securities for transactions in the cash and repo markets.

Recent research by the Office of Financial Research (“OFR”) reemphasizes these benefits of central clearing in the Treasury repo market. In a back-testing analysis of repo and reverse repo positions reported by six global systemically important banks (“G-SIBs”) during the first eight months of 2025, OFR calculated that if the Treasury Clearing Rule had been in effect during this period, each U.S. G-SIB could have freed up an average of $34.5 billion in additional balance sheet space.[4]

In its 2025 Annual Report released by the Trump Administration, the Financial Stability Oversight Council (“FSOC”) underscored the potential benefits of central clearing of Treasury transactions and expressed support for the SEC as it continues working towards the implementation of the Treasury Clearing Rule.[5] So, with that momentum, the SEC continues to undertake extensive outreach to mitigate any issues with the upcoming deadlines.

A. Progress Made

Despite the potential benefits of clearing Treasury transactions, I recognized at the time the SEC adopted the rule, that it would take extensive time, effort, and resources to develop the workflows and processes to integrate market participants into the clearing infrastructure. Given this significant work, it became apparent that the original implementation timeline was too short.

For that reason, upon becoming SEC Acting Chairman, I pushed for a 12-month extension of those deadlines. I was pleased that both of my then-colleagues, Commissioners Hester Peirce and Caroline Crenshaw, unanimously agreed to the extension.[6]

At the time, the February 2025 extension would provide market participants with 22 months to prepare for implementation with respect to cash transactions. Now, that implementation date is less than eleven months away. Thanks to efforts of many, including those who are in this room, we have been able to collectively identify a number of concerns, and the SEC is committed to promptly addressing them.

Our efforts have been focused in three areas:

• First, reviewing applications and proposals aimed at expanding access to, and options for, clearing Treasury securities;

• Second, providing guidance on the scope of the Treasury Clearing Rule, including consideration for providing additional flexibility to ensure that market participants can access liquidity and manage collateral; and

• Third, maintaining a collaborative and transparent approach to implementation.

I will address each of these in turn.

B. Developments in Clearing

New Clearing Agencies

Until recently, there was only a single SEC-registered clearing agency for Treasury securities, the Fixed Income Clearing Corporation (“FICC”). In the last two months, however, the SEC has approved the applications of CME Securities Clearing Inc. and ICE Clear Credit LLC to register as clearing agencies for Treasury securities transactions.[7] These approvals will provide market participants the necessary certainty as to which entities can serve as clearing agencies for Treasury securities and what services they will offer.

Obtaining SEC approval is not an easy process. Section 17A(b)(3) of the Securities Exchange Act of 1934 (“Exchange Act”) sets forth the requirements that an applicant must meet in order to register as a clearing agency.[8] These requirements include whether the entity is so organized and has the capacity to provide the functions of a clearing agency, whether its rules provide for the prompt and accurate clearance and settlement of securities transactions, and whether its rules assure a fair representation of its shareholders or members and participants in the selection of its directors and administration of its affairs. These requirements guide the Commission’s consideration of a clearing agency application, and the Commission must find that an applicant can meet these requirements. In the case of the two new clearing agencies, the Commission made those findings.[9]

Now, with three clearing agencies approved for Treasury securities, market participants will have expanded options for accessing clearing to implement their obligations under the Treasury Clearing Rule. We encourage market participants, who may have questions about the operations of these clearing agencies in relation to their own regulatory obligations, to engage with the central counterparties. If needed, the SEC staff stands ready to be part of those discussions.

Rule Changes in Clearing

Besides reviewing applications from new market entrants, the SEC staff has also been reviewing proposals from FICC to support the Treasury Clearing Rule. On December 22, 2025, the Commission published notice of FICC’s proposed rule change to amend its cross-margining agreement with the Chicago Mercantile Exchange, Inc. (“CME”) to expand its existing cross-margining arrangement with CME to customers. Currently, the arrangement is limited to the proprietary positions of FICC and CME members.[10] Relatedly, the Commission is considering petitions submitted by FICC and CME for exemptive relief from certain provisions of the Exchange Act that would permit expanded cross-margining for customers.[11]

Historically, the Commission has supported and approved cross-margining at clearing agencies and recognized the potential benefits of cross-margining systems. These benefits include freeing up capital through reduced margin requirements, reducing clearing costs by integrating clearing functions, reducing clearing agency risk by centralizing asset management, and harmonizing liquidation procedures. In addition, we understand that certain market participants view an expansion of cross-margining between cash and futures Treasury positions to be an important component of the transition to increased central clearing of Treasury securities. The current proposal from FICC and CME is still outstanding. The Commission must review and consider comments submitted by the public and take them into consideration as it determines whether to approve the proposed rule change.

Additionally, the Commission acted this past December on two proposals from FICC that are aimed at expanding access to clearing ahead of the Treasury Clearing Rule compliance dates. Specifically, the Commission approved a proposed new offering from FICC to establish a “collateral-in-lieu” service as part of the existing sponsored general collateral service.[12] This service would allow FICC to take a lien on the collateral underlying a repo transaction in lieu of charging margin. In most instances, the lien will obviate FICC’s need to collect margin or to obtain a guarantee on the transactions. This service would address what market participants have referred to as “double margining” that increases the costs, and thereby decreases the ability, of a FICC sponsoring member to provide clearance and settlement services to mutual funds and other cash providers. Second, the Commission issued an order approving expansion of FICC’s agent clearing service to include triparty transactions, which should provide an additional option for market participants using that service.[13]

C. Guidance on the Scope of the Treasury Clearing Rule

The SEC has also been engaging with market participants about the scope of the Treasury Clearing Rule. SEC staff has provided guidance in some areas, such as mixed CUSIP triparty repos,[14] but has yet to resolve some other questions.

Flexibility for Inter-Affiliate Transactions

One area where market participants have asked for further regulatory clarity is the application of the Treasury Clearing Rule to inter-affiliate transactions.

When the Commission proposed the Treasury Clearing Rule, the definition of an eligible secondary market transaction provided no exception for inter-affiliate transactions. Commenters, however, asserted that inter-affiliate transactions are important for corporate groups, which use them to achieve efficient risk and capital allocation and to obtain flexibility for addressing customer demands. Further, commenters noted that requiring inter-affiliate transactions to be centrally cleared would impose additional costs but have only limited benefits.[15]

Thus, the final rule included an exemption for inter-affiliate transactions. The Commission recognized that inter-affiliate transactions represent an important tool to transfer liquidity and risk within an affiliated group. The Commission also recognized that, in certain circumstances, the counterparty credit risk posed by inter-affiliate transactions may be less than other transactions.[16]

The inter-affiliate exemption provides that a direct participant of a central counterparty would not have to clear its inter-affiliate transactions if (i) the affiliate was under common control and was either a bank, broker-dealer or a futures commission merchant, and (ii) the direct participant also submitted for clearing the outward-facing transactions of that affiliate.[17]

As the Adopting Release explained, “this [outward facing] condition” was intended to ensure that a direct participant could not rely upon an inter-affiliate transaction to avoid the requirement to clear eligible secondary market transactions. If there were no such condition, a direct participant could simply use inter-affiliate transactions to move securities and funds to affiliates, and the affiliated counterparty could then enter into external transactions with counterparties which, if entered into as a direct participant of a Treasury securities covered clearing agency, would be eligible secondary market transactions. Because the clearing requirement is conditioned on one of the parties being a direct participant, this would undermine the clearing requirement. Under the outward-facing condition, however, the transfer of Treasury securities between a direct participant and its non-direct participant affiliate would only be exempt from the clearing requirement if the non-direct participant affiliate cleared all of its other Treasury repo transactions.

Because the final inter-affiliate exemption had not been exposed to public review, market participants raised a number of concerns, including with respect to the types of entities that can be affiliates for purposes of the exemption and the requirement to clear the outward-facing transactions of the affiliate. SEC staff has been working with market participants to better understand these concerns and how they can be addressed.

Specifically, SEC staff have been considering whether broadening the contours of that exemption could be workable without creating a significant loophole that undermines the purposes of the rule. For example, could the provision that the affiliate be a bank, broker-dealer, or futures commission merchant be modified to allow for more types of entities as affiliates? SEC staff are also considering other potential relief for the inter-affiliate exemption so that market participants can maintain their current business practices for liquidity, treasury, and collateral management. The Commission has received productive feedback from market participants on the inter-affiliate exemption, and my hope is that any potential modifications can be publicly rolled out in the near future, since the compliance date is fast approaching.

Extra-Territorial Reach

The extraterritorial scope of the Treasury Clearing Rule is another area where the SEC staff have engaged in additional outreach efforts. Non-U.S. firms that trade with U.S. counterparties do not typically centrally clear their trades in Treasury securities. Accordingly, it is not surprising that an industry survey on U.S. Treasury central clearing readiness, released last fall, showed lower levels of understanding of the Treasury Clearing Rule amongst non-U.S. firms and lower levels of confidence that these firms would be ready to fulfill their obligations by the extended compliance dates.[18] The SEC is aware that these firms may have larger burdens than U.S. firms in establishing clearing arrangements with intermediaries or central counterparties.[19] SEC staff have been engaging with market participants to understand the jurisdictional issues, and I hope we can address such concerns in the near future.

D. Maintaining a Transparent and Collaborative Approach

There are other areas where implementing the Treasury Clearing Rule has raised questions for market participants about how they should comply with other existing requirements under the federal securities laws.[20] We acknowledge the need for guidance and SEC staff continue to engage with market participants on these questions.

To maximize transparency regarding the SEC’s efforts, we have provided periodic public updates and maintain a comprehensive list of actions taken on a dedicated Treasury Clearing implementation webpage on sec.gov.[21] Materials posted to this dedicated website also are intended to keep market participants informed about the additional work that is underway. Thus, if you see no mention of a particular concern on that website, then it is highly likely that we are not actively working on it—so we strongly encourage firms to identify and raise any remaining challenges or unforeseen issues as we move towards full implementation.

The Commission continues its collaboration with the U.S. Department of the Treasury, the Federal Reserve Board, the CFTC, and international regulators to ensure seamless cross-border implementation. It is in all of our interests to see that the U.S. Treasury securities market remains the deepest, most liquid, and most resilient market in the world.

II. Why Tokenization Matters and Where We Stand

One of the other issues that the Commission is taking a close look at is tokenization, a development that could change the way securities are issued, traded, and managed. It also raises important questions about liquidity, collateral practices, and clearing models, as well as the legal and regulatory frameworks needed to support these changes.

Technology has long shaped the way our markets operate—from paper certificates to dematerialized shares, from physical trading floors to electronic order books. Today, we consider the possibility of migrating securities positions from traditional databases to blockchain-based systems, and tokenization representing these rights and obligations on-chain.

Properly implemented, tokenization can enhance security, transparency, and immutability by encoding rights on digital tokens and recording their provenance on distributed ledgers. It can reduce reliance on intermediaries, streamline transaction lifecycles, and lower operational costs—without sacrificing safeguards that have long protected investors.

Potential technological shifts challenge us to translate existing laws and regulations into new contexts. Today, many of the SEC’s rules assume multi-layered intermediation. However, tokenization offers a pathway to more direct issuer–investor interactions on open, programmable rails. Market demand and confidence should drive whether tokenization becomes reality, and the SEC’s rulebook should not impose unnecessary roadblocks.

A. Innovation with Guardrails

In that sense, SEC rules should be technology-neutral and be focused on outcomes, not solely processes. Tokenized versions of securities remain subject to securities regulation; the shift does not change the legal and regulatory obligations. The challenge is to adapt the rules—on issuance, custody, and trading to name a few—so that those obligations can be met in on-chain environments.

To date, SEC efforts in engagement have been through roundtables, staff statements, and public comment files. Under the Trump Administration, the SEC has ceased using enforcement as the principal method for expressing Commission views on these new technological developments. In that sense, the SEC has returned to its normal approach of providing sub-regulatory guidance and exploring exemptive relief to allow limited-scope pilots to proceed under defined parameters, thereby informing potential future Commission action. This is the same tried-and-true process that gave rise to money market funds and exchange-traded funds in the past.

Tokenization can help modernize capital markets, not only by speeding up the settlement cycle but by making ownership more visible—addressing current challenges in shareholder identification and corporate actions. Visibility and speed are not merely aesthetic improvements; they are core to fair, orderly, and efficient markets, and the Commission should be continually thinking about how these new developments can be incorporated into the markets.

B. Looking Ahead: Opportunities and Responsibilities

Recently, the Commission provided public notice of an exemptive application under the Investment Company Act that demonstrates how tokenization is no longer a theoretical exercise, but is becoming a practical reality.[22] This milestone reflects the Commission’s commitment to innovation without abandoning appropriate guardrails such as ensuring that custody, disclosure, and investor protection standards are in place when assets migrate on-chain. It also exemplifies a pragmatic roadmap—beginning with scoped efforts, learning from the results, and potentially scaling what works.

By moving forward with such applications, the Commission signals that it is open to modernization, provided that it adheres to achieving the objectives of longstanding laws and regulations that govern the securities markets. I hope that these exemptive order applications are not endpoints, but rather waypoints on a journey toward markets that are more fair, orderly, and efficient due to new innovations.

C. First Principles, Enduring Mission

Expectations vary: some predict rapid transformation while others caution that adoption might take years. The Commission’s responsibility is to ensure that its regulations evolve as technology evolves—for the very same reason that the SEC cannot regulate in 2026 in the same manner as in 1934, when the agency was created.

The SEC’s goal should be neither to bless every new innovation nor to resist change reflexively. Rather, it is to use its regulatory tools—including definitional authority and exemptive relief—so that the administration of the federal securities laws can evolve to address new technologies and innovation. Part of this responsibility includes providing transparency as to what is permitted, what requires prior authorization, and what is prohibited.

If financial regulators can carry out this process in an appropriate manner, capital markets will be able to operate in ways that reduce friction, improve price discovery, and serve investors better than ever before. Ultimately, that is the real objective of financial regulation.

Looking ahead, both Treasury clearing and tokenization serve as reminders that modernization is not an abstract goal—it is a practical necessity for resilient, transparent, and efficient markets. These initiatives demand continued engagement with market participants, robust consideration of benefits and costs, thoughtful evaluation of trade-offs among alternative approaches, and a respect for the legal authority governing the SEC’s activities, including the procedural obligations required by the Administrative Procedure Act. These efforts are not simple and may take time, but they are essential. By approaching these changes methodically, the Commission can strengthen market infrastructure, promote responsible innovation, and ensure that America’s capital markets continue to serve investors and the broader economy.

Thank you.

[1] My remarks reflect my individual views as an individual Commissioner and do not necessarily reflect the views of the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) or my fellow Commissioners.

[2] The Commission has mandated that covered clearing agencies require their direct participants to clear certain eligible secondary market transactions in U.S. Treasury securities. See Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule with Respect to U.S. Treasury Securities, Exchange Act Release No. 34-99149 (Dec. 13, 2023), 89 FR 2714 (Jan. 16, 2024) (hereinafter, “Treasury Clearing Rule”).

[3] Federal Reserve Bank of St. Louis, Market Value of Marketable Treasury Debt as of December 2025, available at https://fred.stlouisfed.org/series/MVMTD027MNFRBDAL.

[4] Office of Financial Research, “How Will Central Clearing Impact the Repo Market?” (Jan. 29, 2026), available at https://www.financialresearch.gov/the-ofr-blog/2026/01/29/central-clearing-impact-repo-market/.

[5] Financial Stability Oversight Council, Financial Stability Oversight Council 2025 Annual Report (Dec. 11, 2025), available at https://home.treasury.gov/system/files/261/FSOC2025AnnualReport.pdf.

[6] Extension of Compliance Dates for Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. Treasury Securities, Exchange Act Release No. 34-102487 (Feb. 25, 2025), 90 FR 11134 (Mar. 4, 2025).

[7] CME Securities Clearing, Inc.; Order Granting an Application for Registration as a Clearing Agency under Section 17A of the Securities Exchange Act of 1934, Exchange Act Release No. 34-104281 (Dec. 1, 2025), available at https://www.sec.gov/files/rules/other/2025/34-104281.pdf; ICE Clear Credit LLC; Order Granting an Application for Registration as a Clearing Agency under Section 17A of the Securities Exchange Act of 1934, Exchange Act Release No. 34-104762 (Jan. 30, 2026), available at https://www.sec.gov/files/rules/other/2026/34-104762.pdf.

[8] 15 U.S.C. 78q-1(b)(3).

[9] See supra note 7.

[10] Exchange Act Release No. 34-104485 (Dec. 22, 2025), available at https://www.sec.gov/files/rules/sro/ficc/2025/34-104485.pdf. FICC also filed a related advance notice, consistent with its obligations as a systemically important financial market utility under Title VIII of the Dodd-Frank Act. See Exchange Act Release No. 34-104486, available at https://www.sec.gov/files/rules/sro/ficc/2025/34-104486.pdf.

[11] FICC and CME have also submitted petitions to the Commodity Futures Trading Commission (“CFTC”) for exemptive relief from certain provisions of the Commodity Exchange Act. See Exchange Act Release No. 34-104748, available at https://www.sec.gov/files/rules/other/2026/34-104748.pdf; see also CFTC, Press Release, Acting Chairman Pham Announces Implementation of U.S. Treasury Market Reforms: Proposed Order Would Expand CME-FICC Cross-Margining Program to Customers (Dec. 12, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9155-25.

[12] See Exchange Act Release No. 34-104374 (Dec. 12, 2025), available at https://www.sec.gov/files/rules/sro/ficc/2025/34-104374.pdf.

[13] See Exchange Act Release No. 34-104492 (Dec. 22, 2025), available at https://www.sec.gov/files/rules/sro/ficc/2025/34-104492.pdf.

[14] For example, the Division of Trading and Markets, last fall, issued answers to Frequently Asked Questions regarding the applicability of the Treasury Clearing Rule to certain general collateral triparty repos, which are also referred to as mixed CUSIP triparty repos. The staff expressed the view that, under the circumstances described in the FAQ, such a transaction would not be a transaction that must be cleared under the Treasury Clearing Rule. See Division of Trading and Markets: Frequently Asked Questions – Treasury Clearing Rule (updated as of Dec. 8, 2025), available at https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/frequently-asked-questions-treasury-clearing-093025.

[15] See, e.g., Letter from Robert Toomey, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, and Michelle Meertens, Deputy General Counsel, Institute of International Bankers, at 21-22 (Dec. 22, 2022) available at https://www.sec.gov/comments/s7-23-22/s72322-20153420-320842.pdf.

[16] Treasury Clearing Rule, 89 FR 2737.

[17] 17 CFR 240.17ad-22(a) (definition of “eligible secondary market transaction”).

[18] See Press Release, U.S. Treasury Central Clearing Survey: U.S. Firms Have High Degree of Confidence in Readiness While Europe and Asia Lag; Regulatory Clarity is a Key Factor (Nov. 10, 2025), available at https://www.sifma.org/resources/news/press-releases/u-s-treasury-central-clearing-survey-u-s-firms-have-high-degree-of-confidence-in-readiness-while-europe-and-asia-lag-regulatory-clarity-is-a-key-factor/.

[19] See id.

[20] For example, with respect to the Customer Protection Rule, Exchange Act Rule 15c3-3, we have received questions from market participants regarding the potential ability of broker-dealers to reflect a reserve formula debit in instances where customer margin for U.S. Treasury transactions is delivered to a qualified covered clearing agency on a net basis, rather than gross basis as required under the current rule. We have also received questions concerning how the Treasury Clearing Rule applies in the event of the unavailability of a central counterparty or a failed trade, as well as what it means to be “of a type accepted for clearing” as that language is used in the rule’s definition of an eligible secondary market transaction.

[21] See Treasury Clearing Implementation, U.S. Securities and Exchange Commission (updated as of Feb. 2, 2026), available at https://www.sec.gov/featured-topics/treasury-clearing-implementation.

[22] 91 FR 3757 (Jan. 28, 2026).

Following a year - 2025 - fresh off Chokepoint 2.0 and the generally crypto-unfriendly Gary Gensler SEC, a year when we saw the passage of The Genius Act and the release of the 151-page White House Report “Strengthening American Leadership in Digital Financial Technology,” we now have a long-awaited taxonomy for Tokenized Securities.

Below, we have provided the entirety of the Statement as published on SEC.gov (January 28th, 2026). For Vertalo’s analysis and how Vertalo’s platform complies with and provides support for issuers and other affected parties, please visit ‘How Vertalo’s Platform enables Issuers and other parties with SEC Compliant Tokenized Securities Technology and Services.”

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The following is a mirror-image version of The Statement as published on SEC.gov

Introduction

As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets,[1] the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets are providing their views[2] on the taxonomies associated with tokenized securities.[3] A tokenized security is a financial instrument enumerated in the definition of “security”[4] under the federal securities laws that is formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks. There are a variety of models used to tokenize securities and they vary in terms of structure and the rights afforded to holders. Tokenized securities generally fall into two categories: (1) securities tokenized by or on behalf of the issuers of such securities; and (2) securities tokenized by third parties unaffiliated with the issuers of such securities.[5] This statement is intended to assist market participants as they seek to comply with the federal securities laws and prepare to submit any necessary registrations, proposals, or requests for appropriate action to the Commission or its staff. We stand ready to engage regarding any questions.

Issuer-Sponsored Tokenized Securities

An issuer may tokenize a security by issuing it in the format of a crypto asset.[6] To accomplish this, the issuer (or its agent) integrates DLT into the systems that it uses to record owners of the security (the “master securityholder file”), such that a transfer of the crypto asset on the crypto network results in a transfer of the security on the master securityholder file. Consequently, the only difference between a security issued in this manner and securities issued in traditional format is that instead of maintaining the master securityholder file through conventional, offchain database records, the issuer (or its agent) maintains the master securityholder file on one or more crypto networks, which functionally are onchain database records. As part of this recordkeeping system, the issuer (or its agent) uses onchain database records alongside offchain database records and associates the onchain information (e.g., wallet address, quantity of security owned, and issue date) with relevant offchain information (e.g., security holder name and address).

A single class of securities could be issued in multiple formats, including tokenized format. Similarly, an issuer may permit security holders to hold a security in different formats and convert the security from one format to another. The format in which a security is issued or the methods by which holders are recorded (e.g., onchain vs. offchain) does not affect application of the federal securities laws.[7] For example, regardless of its format, the Securities Act requires that every offer and sale of a security must be registered with the Commission unless an exemption from registration is available. Similarly, stock is an “equity security” under the Securities Act and the Exchange Act regardless of its format.[8]

On the other hand, the tokenized security could be of a different class of securities from those issued in traditional format. For example, an issuer could issue one class of common stock in traditional format and issue a separate class of common stock as a tokenized security. However, if the tokenized security is of substantially similar character as the security issued in traditional format and holders of the tokenized security enjoy substantially similar rights and privileges, the tokenized security may be considered of the same class as the security issued in traditional format for certain purposes under the federal securities laws.[9]

Alternatively, an issuer (or its agent) may tokenize a security without a crypto network constituting, or being part of, the master securityholder file. Under this model, the issuer issues the security offchain and issues a crypto asset to security holders. The crypto asset does not convey any rights, obligations, or benefits of the security, and the crypto asset and its onchain database records are not directly integrated into the master securityholder file for the security.[10] Instead, the crypto asset may be used indirectly to effect transfers of the security on the master securityholder file. In this case, the transfer of the crypto asset, which is a securities transaction, operates to notify the issuer (or its agent) to record the transfer of ownership of the security on the master securityholder file. Because the offchain database records constitute the master securityholder file, the issuer (or its agent) will use the onchain database records to update the offchain database records to record the transfer of ownership of the security.

Third Party-Sponsored Tokenized Securities

In addition to issuer-sponsored tokenized securities, third parties unaffiliated with an issuer of a security could tokenize the unaffiliated issuer’s security. The models that third parties are using to tokenize securities vary, and the rights, obligations, and benefits associated with the crypto asset may or may not be materially different from those of the underlying security. In addition, the crypto asset may or may not represent an ownership interest in or contractual obligation of the issuer of the underlying security and, as such, may or may not confer upon the holder of the crypto asset any rights as a holder of the underlying security. Further, holders of the crypto asset may be exposed to risks with respect to the third party, such as bankruptcy, to which a holder of the underlying security would not necessarily be exposed.

We have observed two models where a third party tokenizes securities issued by another person: custodial tokenized securities and synthetic tokenized securities. Under the first model, the third party issues a crypto asset representing the underlying security, such as a tokenized security entitlement.[11] The underlying security is held in custody, and the crypto asset evidences the holder’s ownership interest (whether direct or indirect) in the underlying security being held in custody. Under the second model, the third party issues a crypto asset representing its own security that provides synthetic exposure to the underlying security, such as a tokenized linked security or a tokenized security-based swap.[12]

First Model: Custodial Tokenized Securities

Tokenized Security Entitlement

A third party may tokenize a security issued by another person by creating a security entitlement that is formatted as a crypto asset.[13] Similar to the issuer-sponsored model discussed above, the third party may accomplish this by integrating DLT into the systems that it uses to record entitlement holders, such that a transfer of the crypto asset results in a transfer of the security entitlement on the third party’s records. Under this model, the crypto asset represents the holder’s indirect interest in the underlying security via the security entitlement.[14] The format in which the security entitlement is issued does not affect application of the federal securities laws.

Alternatively, a third party may tokenize a security entitlement without a crypto network constituting, or being part of, the systems that it uses to record entitlement holders. Under this model, the crypto asset may nonetheless be used to transfer the security entitlement on the third party’s records similar to the issuer-sponsored model discussed above.[15] Because the records are maintained offchain, the third party will use the onchain database records to update the offchain database records to record the transfer of the security entitlement.

Second Model: Synthetic Tokenized Securities

Linked Security

A third party may tokenize a security issued by another person by issuing a “linked security” formatted as a crypto asset. A “linked security” is a security issued by the third party itself that provides synthetic exposure to a referenced security, but it is not an obligation of the issuer of the referenced security and confers no rights or benefits from the issuer of the referenced security. The return on a linked security is linked to the value of the security it references or events relating to the referenced security. A linked security may be a debt security (such as a structured note[16]) or an equity security (such as exchangeable stock). Under certain circumstances, as discussed below, a linked security may be a security-based swap. The crypto asset representing the linked security is similar to the crypto assets discussed under “Issuer-Sponsored Tokenized Securities” above.

Security-Based Swap

A third party may tokenize a security issued by another person by issuing a security-based swap formatted as a crypto asset.[17] A security-based swap is a security that generally provides synthetic exposure to, among other things, either a referenced security or certain referenced events relating to an issuer of a security. A security-based swap typically does not convey to the holder any equity, voting, information, or other rights with respect to the referenced security. The third party may not offer or sell the crypto asset representing the security-based swap to persons who are not eligible contract participants[18] unless a Securities Act registration statement is in effect as to the crypto asset,[19] and the transactions in the crypto asset are effected on a national securities exchange.[20] The crypto asset representing the security-based swap is similar to the crypto assets discussed under “Issuer-Sponsored Tokenized Securities” above.

The term “security-based swap” is defined in Section 3(a)(68) of the Exchange Act. The definition of “security-based swap” includes any agreement, contract, or transaction that is a swap (as defined in Section 1a of the CEA)[21] and is based on: (1) an index that is a narrow-based security index, including any interest therein or on the value thereof; (2) a single security or loan, including any interest therein or on the value thereof; or (3) the occurrence, nonoccurrence, or extent of the occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrow-based security index, provided that such event directly affects the financial statements, financial condition, or financial obligations of the issuer. If a financial instrument formatted as a crypto asset is a swap and it satisfies one of the three prongs of the definition of “security-based swap,” then the crypto asset may represent a security-based swap. For example, if the crypto asset provides on an executory basis for the exchange, on a fixed or contingent basis, of one or more payments based on the value of a security, but does not also convey a current or future direct or indirect ownership interest in an asset or liability that incorporates the financial risk transferred, that crypto asset may represent a security-based swap.[22] Similarly, if the crypto asset provides for payments that are dependent on the occurrence, non-occurrence or extent of occurrence of an event or contingency that is associated with a potential financial, economic, or commercial consequence, does not fall within one of the specified exclusions, and meets any of the three prongs of the security-based swap definition discussed above, that crypto asset may represent a security-based swap.[23]

Security-based swaps and linked securities are economically similar, although certain additional or different provisions apply to the regulation of security-based swaps under the federal securities laws, including with respect to transactions with persons who are not eligible contract participants as noted above.[24] The assessment of whether a financial instrument is a security-based swap or a linked security depends, in part, on the exclusions from the definition of “swap.” There are several exclusions from the definition of “swap” relating to securities.[25] To the extent a financial instrument falls into one of these exclusions, it is not a swap and, therefore, is not a security-based swap. For example, any note, bond, or evidence of indebtedness that is a security, as defined in Section 2(a)(1) of the Securities Act, is excluded from the definition of swap.[26] Similarly, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on the value thereof, that is subject to the Securities Act and the Exchange Act, is excluded from the definition of swap.[27] When assessing whether a financial instrument formatted as a crypto asset satisfies one of these exclusions, the economic reality of the instrument rather than the name given to the instrument determines whether it is excluded.[28]

Further Information

If you have inquiries for the Division of Corporation Finance, please submit your questions to the Division’s Office of Chief Counsel using the Corporation Finance Request Form for Interpretive Advice and Other Assistance. If you have inquiries for the Division of Investment Management, please review the Division’s Contact Information page for relevant contacts. If you have inquiries for the Division of Trading and Markets, please call (202) 551-5777 or email tradingandmarkets@sec.gov.

[1] For purposes of this statement: a “crypto asset” is any digital representation of value that is recorded on a cryptographically secured distributed ledger; and a “crypto network” is a blockchain or similar distributed ledger technology (“DLT”) network. In addition, for purposes of this statement, “onchain” refers to transactions or data that are processed and recorded directly on a crypto network and “offchain” refers to transactions or data that are processed and recorded outside of a crypto network. The foregoing definition of “crypto asset” is identical to the definition of “Digital Asset” in Section 2(6) of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, Pub. L. No. 119-27, 139 Stat. 419 (2025).

[2] This statement represents the views of the staff of the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets. It is not a rule, regulation, guidance, or statement of the U.S. Securities and Exchange Commission (“Commission”), and the Commission has neither approved nor disapproved its content. This statement, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.

[3] Tokenization is the process of creating a digital representation of a tangible or intangible asset using DLT.

[4] The term “security” is defined in Section 2(a)(1) of the Securities Act of 1933 (“Securities Act”), Section 3(a)(10) of the Securities Exchange Act of 1934 (“Exchange Act”), and Section 2(a)(36) of the Investment Company Act of 1940 (“Investment Company Act”).

[5] Both federal and state law govern the activities, transactions, and relationships among the parties involved with tokenizing securities. For purposes of this statement, we assume that the activities and transactions by the parties described in this statement are in compliance with applicable law and any governing documents. For example, we assume that tokenized securities are not subject to any restriction on transfer imposed by the issuer and are properly issued and transferred under applicable state law, and that, in each instance, a transfer of the crypto asset results in a transfer of control of the security or security entitlement and/or ownership of the security or security entitlement via an effective indorsement, instruction, or entitlement order, as the case may be. See Article 8 of the Uniform Commercial Code.

[6] It is possible to tokenize any type of security, including stocks, bonds, notes, investment contracts, options on securities, and security-based swaps. This statement assumes that the crypto asset created to represent the security is not itself a separate security.

[7] An issuer that is subject to the Investment Company Act and issues its securities in different formats, including in tokenized format on different crypto networks, may raise multi-class issues under Section 18 of the Investment Company Act.

[8] See Section 3(a)(11) of the Exchange Act, Rule 3a11-1 under the Exchange Act, and Rule 405 under the Securities Act.

[9] See, e.g., Sections 12(g)(5) and 15(d)(1) of the Exchange Act.

[10] This statement assumes that the crypto asset created to represent the security is not itself a separate security.

[11] We are aware of a tokenization model known as “digital custodial receipt.” Based on our current understanding of this model, we do not view it as separate or distinct from the tokenized security entitlement model and, therefore, do not address it separately in this statement.

[12] Under this model, depending on the facts and circumstances, the third party may be deemed to be an investment company under the Investment Company Act.

[13] For a more fulsome description of the indirect system of ownership, see Concept Release on the U.S. Proxy System, Release No. 34-62495 (Jul. 14, 2010), 75 FR 42982 (Jul. 22, 2010). See also The Depository Trust Company no-action letter (Dec. 11, 2025), available at https://www.sec.gov/files/tm/no-action/dtc-nal-121125.pdf.

[14] This statement assumes that the crypto asset created to represent the security is not itself a separate security.

[15] Id.

[16] See Office of Investor Education and Advocacy, Investor Bulletin: Structured Notes (Jan. 12, 2015), available at https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-76.

[17] This is not the only circumstance in which a tokenized security could result in a security-based swap. Depending upon the facts and circumstances, securities tokenized by or on behalf of the issuers of such securities also could result in a security-based swap.

[18] The term “eligible contract participant” is defined in Section 1a(19) of the Commodity Exchange Act (“CEA”). In 2012, the Commission and the Commodity Futures Trading Commission, in consultation with the Board of Governors of the Federal Reserve System, jointly further defined the term “eligible contract participant.” See Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant” and “Eligible Contract Participant,” Release No. 34-66868 (Apr. 27, 2012), 77 FR 30596 (May 23, 2012).

[19] See Section 5(e) of the Securities Act. Alternatively, the offer and sale of the crypto asset to eligible contract participants could be conducted pursuant to an exemption from the registration requirements of the Securities Act.

[20] See Section 6(l) of the Exchange Act. Transactions in the crypto asset among eligible contract participants do not need to be effected on a national securities exchange. For example, such transactions could be effected bilaterally or on a security-based swap execution facility.

[21] The term “swap” is defined in Section 1a(47) of the CEA and consists of six prongs and specified exclusions. See Section 1a(47)(A) and (B) of the CEA, respectively. If a crypto asset satisfies one or more of the prongs of the definition of “swap” and does not fall within one of the statutorily specified exclusions, the crypto asset is a swap.

[22] See Section 1a(47)(A)(iii) of the CEA and Section 3(a)(68) of the Exchange Act.

[23] See Section 1a(47)(A)(ii) of the CEA and Section 3(a)(68) of the Exchange Act.

[24] See footnote 18 above and accompanying text.

[25] See Section 1a(47)(B) of the CEA.

[26] See Section 1a(47)(B)(vii) of the CEA. Structured notes typically fall within this exclusion.

[27] See Section 1a(47)(B)(iii) of the CEA.

[28] See Tcherepnin v. Knight, 389 U.S. 332, 336 (1967) (noting that in searching for the meaning and scope of the word “security,” form should be disregarded for substance, and the emphasis should be on economic reality).

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The landscape of digital assets, tokenization, and regulatory structures is evolving rapidly. At a recent panel discussion, industry experts shared their experiences and perspectives on tokenized securities, regulatory shifts, and the future of financial markets. Key themes included the tokenization of real-world assets (RWA), compliance challenges, and the role of stablecoins in the next phase of digital finance.

Brandy Kolasky, one of the panelists, shared her journey in the space, which began with helping invent the idea of bypassing flare gas on oil fields to power crypto mining. This experience led her to California, where she joined a VC club called Deal Box and later moved into the realm of digital asset securities. Alongside her, Dave Hendricks, CEO and founder of Vertalo, provided insights into how the industry has matured, the shift from "pirate" behavior to regulatory compliance, and the transformation of private capital markets through tokenization.

The Transition from Pirates to the Navy: Regulation & Opportunity

One of the most compelling analogies discussed was the shift from early adopters operating as “pirates” to the industry evolving into a structured, regulated market (the “Navy”). While some saw regulation as stifling innovation, panelists argued that compliance unlocks institutional capital and mainstream adoption.

• Many early players enjoyed the “wild west” of crypto, but as tokenization matures, regulatory clarity is leading to more sustainable business models.

• Over 100 issuances of digital asset securities have transitioned into regulated alternative trading systems (ATS), bridging the gap between innovation and compliance.

• The SEC’s evolving stance has created challenges, but also new opportunities for businesses ready to adapt.

Tokenization and Alternative Trading Systems (ATS)

Tokenization is transforming the landscape of securities, making it easier to transfer and trade assets that were previously illiquid.

• ATS platforms like tZero and PPEX have enabled secondary trading for private securities.

• The panel highlighted the challenges in investor accessibility and legal frameworks, emphasizing the need for regulatory harmonization.

• The tokenization of funds, private equity, and real estate is on the rise, with institutions gradually warming up to the idea.

ETF Minting: The Next Big Move?

A major development discussed was ETF minting and redemptions that integrate both RWA and crypto assets.

• The industry is moving towards DeFi-ready ETFs that bridge traditional finance (TradFi) with decentralized finance (DeFi).

• This model allows for instant settlement, lower costs, and broader accessibility, making tokenized funds a major opportunity for institutional investors.

The Role of Stablecoins in a Tokenized Economy

Stablecoins, particularly those backed by real-world assets, were another hot topic. The panelists explored the growing importance of endogenous stablecoins—stablecoins that derive value from their underlying yield-bearing primitives rather than being purely fiat-backed.

• Endogenous stablecoins can act as collateral while capturing income streams from real-world assets.

• Regulatory clarity will determine their role in financial markets, with some jurisdictions showing greater openness than others.

• Multi-chain asset interoperability is crucial for stablecoins to function efficiently across different ecosystems.

The Next Big Thing Post-Treasury Tokenization?

Tokenized U.S. treasuries have been the biggest success story in RWA, but what’s next?

• Energy markets are an emerging area of tokenization, particularly in power generation and renewable energy investments.

• Real estate tokenization continues to grow, offering fractional ownership models with improved liquidity.

• Infrastructure projects could also benefit from tokenization, allowing investors to participate in traditionally inaccessible asset classes.

Navigating a Volatile Market

Web3 hedge funds and digital asset managers are increasingly relying on tokenized instruments to navigate volatile markets.

• The ability to buy, sell, and trade digital twins of real-world assets is creating new investment strategies.

• Risk management tools leveraging smart contracts are improving liquidity and transparency in digital asset markets.

The Call to Action: Industry Engagement

The panelists emphasized the importance of industry players actively engaging with policymakers to shape the future of tokenized assets.

What Can You Do?

1. Engage with Lawmakers: Reach out to your senators and representatives to ensure balanced regulatory frameworks.

2. Adopt Best Practices: Companies should align with existing financial regulations to build credibility.

3. Innovate Within the Rules: There’s ample room for creativity within regulatory guardrails, ensuring long-term sustainability.

Conclusion

Tokenization is revolutionizing financial markets, but the transition from a decentralized, unregulated world to a compliant, institutional-grade ecosystem is still ongoing. Regulatory clarity, innovative financial products, and a focus on real-world applications will drive the next phase of growth.

As the industry matures, those who can balance innovation with compliance will be best positioned to thrive in the digital asset economy. The future of tokenization is being written now—will you be part of it?

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The regulatory landscape for digital assets has long been a source of frustration and uncertainty. The U.S. Securities and Exchange Commission (SEC), known for its often rigid stance on crypto-related innovations, has historically opted for enforcement actions rather than proactive rulemaking. However, a recent move by SEC Commissioner Hester Peirce signals a potential shift in strategy—one that invites the industry to actively shape the future of regulation.

On February 21, 2025, Peirce issued a Request for Information (RFI), seeking public feedback on various aspects of digital asset regulation. Her statement, aptly titled “There Must Be Some Way Out of Here,” underscores the urgent need for clearer, more adaptable regulatory frameworks. In it, she acknowledges that the current approach—largely defined by enforcement actions and ambiguous guidance—has stifled innovation, driven businesses offshore, and left investors in a precarious position.

A Call for Industry Participation

Peirce’s RFI represents a rare opportunity for industry participants—founders, developers, investors, legal experts, and other stakeholders—to voice their concerns and recommendations directly to the SEC. Unlike previous regulatory actions that have often left companies reacting to enforcement rather than engaging in constructive dialogue, this initiative provides a platform to advocate for policies that support responsible innovation.

The RFI seeks insights on several key areas, including:

• Market Structure Considerations for Digital Assets: What adjustments should be made to existing market regulations to accommodate digital assets? Are current trading, clearing, and settlement mechanisms compatible with blockchain technology?

• Custody and Safekeeping of Tokenized Securities: How can custodial standards be modernized to reflect the unique properties of digital assets? What safeguards are necessary to ensure security and compliance?

• Disclosure Requirements and Transparency: How can disclosure frameworks be tailored to provide meaningful transparency without imposing unnecessary burdens on issuers?

• Potential Modifications to Existing Regulations: What regulatory exemptions, amendments, or new frameworks are necessary to foster innovation while maintaining investor protection?

The Stakes: Will the SEC Finally Embrace Regulatory Clarity?

Peirce has long been a proponent of a more balanced approach to digital asset regulation. Her dissenting opinions in numerous SEC enforcement actions reflect her belief that the agency’s approach has been reactive rather than constructive. The RFI signals her continued effort to push the Commission toward a regulatory model that is predictable, transparent, and conducive to growth.

The digital asset industry has been at a crossroads. While innovation continues at a rapid pace—driven by advancements in tokenization, decentralized finance (DeFi), and blockchain infrastructure—U.S. regulatory uncertainty has forced many businesses to relocate to more crypto-friendly jurisdictions. This exodus of talent and capital poses a long-term risk to America’s leadership in financial technology.

If industry stakeholders seize this moment and provide robust, well-reasoned responses to the RFI, the SEC may be compelled to reconsider its approach. A well-crafted regulatory framework could pave the way for:

• Greater institutional adoption of blockchain-based assets

• A more competitive U.S. digital asset market

• Enhanced investor protections without stifling innovation

• A departure from the current reliance on regulation by enforcement

How to Get Involved

For those who have long been frustrated by the SEC’s approach, now is the time to act. This is one of the most direct opportunities to influence policymaking at the Commission.

• Submit Your Input Here: SEC Public Comment Portal

• Request a Meeting with SEC Staff: Meeting Request Form

• Read Peirce’s Full Statement: SEC Website

Final Thoughts

Commissioner Peirce’s RFI could be a turning point for digital asset regulation, but only if the industry steps up and makes its voice heard. The alternative is continued regulatory ambiguity, stifled innovation, and a persistent game of enforcement cat-and-mouse.

If you care about the future of blockchain and digital assets in the U.S., take this opportunity to engage. A more thoughtful, innovation-friendly regulatory framework won’t emerge on its own—it requires proactive industry participation.

The SEC is listening. The question now is: will the digital asset community speak up?

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Every day, more research reports are written by and about the impact of DLT (Distributed Ledger Technology) in large financial institutions. In fact, so much is being written about the potential impact of DLT and Crypto that it is impossible to keep up.

Even a casual reader of these reports will come to a conclusion on their own, but after reading them it's hard to escape one simple conclusion. Asset Management is the killer use case and application for this game-changing technology.

Distributed Ledger Technology (DLT) is poised to transform asset management in large financial institutions, offering unprecedented levels of efficiency, transparency, and security. By leveraging the immutable and decentralized nature of DLT, asset managers can streamline operations, reduce costs, and unlock new opportunities for growth and innovation, enabling financial institutions to issue and manage their own RWA (Real World Asset) offerings.

As a founder and builder with 7 years of experience in providing Tokenization and DLT-enhanced Transfer Agency technology, I have long believed that the killer app of DLT is not ‘tokenization’ by itself, but rather the use of tokenization technology to upgrade and enhance the asset management function.

The potential of DLT is so transformative that perhaps the acronym should be unwrapped as 'Displacing Legacy Technology' instead. What is so special about DLT to support that assertion?

Enhanced Transparency and Auditability Lowers Costs

One of the most significant advantages of DLT in asset management is the creation of a shared, immutable ledger of asset data. This transparent and trustful record can provide a single source of truth for all stakeholders, eliminating discrepancies and reducing the need for time-consuming and costly reconciliations. This last point alone can create dramatic potential reductions in institutional costs, while also  avoiding errors in the recording of transactions and the calculation of dividends, a cornerstone of asset management. 

As an illustration of dramatic cost reductions, Franklin-Templeton recently revealed that the legacy cost of clearing 50,000 transactions is around $50,000. Through the application of DLT, that same cost drops to about a buck fifty-two ($1.52). This is an improvement of around 30,000 times. (link)  

The append-only nature of DLT enables lower costs, but also ensures a permanent, auditable history of ownership and all changes since issuance and all subsequent transactions. In addition, DLT’s cost savings benefits also greatly simplify compliance with securities and by-laws as well as regulatory reporting requirements.

Streamlined Operations through Smart Contracts

Smart contracts, a key feature of DLT platforms, introduce programmability to asset management processes in a way that is simply impossible with central databases and spreadsheets. These self-executing contracts can automate various aspects of asset management, including:

• Payments and disbursements

• Trading and settlement

• Purchase and redemption of assets

• Shareholder voting

• Corporate actions

By automating certain routine processes, asset managers can potentially reduce operational costs, minimize human error and improve the investor User Experience.

WhileSmart Contract Autonomy may be premature at this stage of the adoption cycle, the potential for smart contracts and DLT that manages them is obvious once the primacy of the ledger is recognized. 

Improved Liquidity and Efficiency

DLT has the potential to transform traditionally opaque markets, such as private equity and venture capital, by providing a permissioned, shared, verifiable and immutable history of transactions. This increased transparency can lead to improved liquidity in these markets, as investors gain more confidence in the underlying assets and their valuation.

In debt markets, DLT can enhance and ultimately simplify bond issuance, trading, and oversight. DLT’s transparency benefits potentially resulting in  more accurate pricing, lower operational expenses, and increased liquidity within debt trading ecosystems.

Expanded Asset Classes and Tokenization

DLT extends beyond traditional financial assets to include non-financial assets like real estate, manufacturing equipment, carbon credits, art, and collectibles. Through tokenization, these high-value assets become more accessible to a broader range of investors, potentially opening up new revenue streams for asset managers.

Enhanced Risk Management and Compliance

The transparent nature of DLT can significantly improve risk assessment and management. Real-time trade surveillance becomes more feasible on a DLT platform, helping to identify and prevent market manipulation, insider trading, and other types of fraud. This enhanced oversight can lead to more accurate pricing and potentially lower risk premiums, reducing the overall cost of borrowing.

Operational Liquidity Optimization

DLT-based solutions can help financial institutions optimize their liquidity management. For example, intraday repos and real-time collateral and FX swaps enabled by DLT can provide access to liquidity with near-instantaneous settlement. This allows institutions to decrease their reliance on intraday liquidity buffers and credit lines, minimizing funding costs.

Global Liquidity Management

For global institutions, DLT can potentially reduce the need to hold liquidity in multiple entities and geographic regions. Some global banks have already implemented tokenized cash and centralized intercompany liquidity pools, allowing for instantaneous liquidity transfers around the clock.

Challenges and Considerations

While the potential benefits of DLT in asset management are significant, there are challenges to overcome. These include regulatory uncertainties, the need for standardized data and record-keeping practices, and the requirement for interoperability between different DLT platforms as well as the existing legacy solutions and technologies which create the problems that DLT platforms seek to address.

In recent decades, we have seen the incredible impact that the introduction of electronic trading and settlement had on the growth of the financial services industry. DLT appears to hold a similar promise. As the financial industry continues to evolve, embracing DLT will be crucial for asset managers looking to stay competitive while reducing risk and baked-in costs. By leveraging this technology, large financial institutions can not only improve their operational efficiency and risk management but also unlock new opportunities for innovation and growth in the asset management space.

Learn more about the applications of DLT in Asset Management via the sources below:

 EY: https://www.ey.com/en_us/insights/financial-services/what-digital-assets-and-dlt-offer-treasury

JPMorgan (2): https://media-publications.bcg.com/The-Future-of-Distributed-Ledger-Technology-in-Capital-Markets.pdf

https://iongroup.com/blog/markets/dlt-can-play-a-key-role-in-collateral-management-but-wider-adoption-is-still-far-off/

CITI: https://www.citigroup.com/global/insights/bringing-traditional-assets-digital-networks-exploring-tokenization-private-markets

HSBC: https://www.gbm.hsbc.com/en-gb/insights/market-and-regulatory-insights/reinventing-asset-servicing-with-distributed-ledger-technology

Deutsche Bank: 

https://flow.db.com/more/technology/transforming-banking-with-dlt

Aptos and Invesco:

https://www.bcg.com/press/29october2024-tokenized-funds-the-third-revolution-in-asset-management-decoded

Vertalo:  

https://chainenabled.substack.com/p/distributed-ledger-technology-use

The Vertalo team aggregated and summarized key findings from 19 reports spanning 2021-2023, by analyzing and normalizing data from whitepapers and research reports written and performed by analysts at major financial institutions, global consulting firms and non-profits.  The whitepapers and research reports covered and collected end-user feedback on the topic of institutional adoption of digital assets, blockchain (distributed ledger technology) and tokenization with the goal to curate and summarize themes and findings uncovered by major players and thought leaders from the‘TradFi’ and ‘Web3’ communities. None of the information presented in this report - other than some pattern analysis - is owned or originally created by Vertalo; all content has been aggregated from publicly available external sources which have been source-linked in each report.

We list out the reports that we curated by year below. For most reports, there are links to the original source material.

2023 Reports

State Street -

Report: “Digital Assets Survey”

Authors: State Street

Published: January 2023

Report Type: Survey

Survey Size: 300

Survey Participants: Investment Management (26%), Head of Digital/Innovation (25%), Investment Ops and/or Technology (25%), CEO/Head of Corporate Strategy with oversight of all functions above (24%)

When asked about how tokenization will change holding and distributing asset classes, executives said tokenization will:

• 58% increase transparency

• 49% lead to faster and more efficient trading

• 47% lower compliance costs and significantly reduce risk

• 46% significantly reduce transaction management costs

Most executives say their digital asset allocations have either not changed or have only changed slightly in the past 12 months (73%); even more expect little or no changes over the next 12 months (82%). However, more than two-thirds (69%) expect to significantly or slightly increase their allocation in the next 2–5 years.

Roughly half believe private equity (51%) and roughly half believe physical assets (48%) will be the first to be tokenized and routinely traded digitally, but not for at least 5 years. In the fund industry, 23% expect it to take 5–9 years for digital trading to become a commonplace means of transferring mainstream assets, while 37% expect it to take 10+ years.

Executives see value in digital asset services, but their implementation plans vary. When asked about which digital asset services would be most useful to their firm, executives were most likely to select digital distribution mechanisms (41%), asset/fund issuance and tokenization (37%), and digital fund administration and accounting services (34%) as their top three.

Plans for in-house implementation are more popular than outsourcing for investing in and trading the assets (47% in-house, vs. 19% outsourced); for asset/fund issuance and tokenization (38% vs. 28%); for a complete, unified view of all assets (39% vs. 35%); and for cybersecurity (46% vs. 30%). On the other hand, outsourcing is more popular than in-house implementation for distributed ledger/blockchain network creation/maintenance (34% in-house, vs. 37% outsourced), smart contract generation (34% vs. 43%), and digital asset prime brokerage services and collateral management (32% vs. 48%).

Bain & Company -

Report: “Global Private Equity Report: Web3 Remains Highly Relevant for Private Equity”

Authors: Thomas Olsen, Gene Rapoport, Alexander Mitscherlich, Kelly Pu, Parker DeRensis

Published: February 2023

Report Type: Analyst Report

Whether you’re an investor funding the next generation of IT infrastructure, a fund manager performing due diligence on traditional companies exposed to web3 changes, or a PE strategist evaluating new types of funds and distribution channels, web3 is very likely to emerge as a critical theme over the next 10 years.

Major companies across industries—JPMorgan, Goldman Sachs, Google, and Disney among them—have begun to think about how web3 will influence their businesses and what it could unlock in terms of managing transactions and engaging with customers.

Forward-thinking private equity firms are also focused on the ways in which blockchains, tokens, smart contracts, and related web3 technologies will affect how they invest and operate. We [Bain] sees three important ways in which web3 is becoming increasingly relevant for private equity: As an investment theme, as a disruptive threat (or opportunity) for the portfolio, and as a tool for new fund strategies.

Over the next decade, the burgeoning set of web3 innovations could affect a broad sweep of industries and companies, some of which aren’t necessarily obvious today, particularly financial services, tech/telecom, and sports/entertainment.

Half of the world’s investable wealth is owned by individuals. Yet these investors account for only 16% of the AUM held by alternative funds. Tokenization is one way to tap this vast market.

Inefficient, illiquid markets with easy-to-authenticate assets, like private equity, private debt, and private real estate, probably have the most to gain [from tokenization].

Financial insights:

• $94 Billion - approximate amount of start-up capital invested into thousands of Web3 companies since 2021.

• $49 Billion - approximate amount of investment into Web3 specifically for financial market infrastructure to date.

ONYX by JPMorgan -

Report: “Deposit Tokens: A foundation for stable digital money”

Authors: Oliver Wyman Forum, Onyx by J.P. Morgan

Published: March 2023

Report Type: Whitepaper

Digital Asset Project(s):  Project Guardian, JPM Coin System, SGD Deposit Tokens by JPMorgan

We believe deposit tokens will become a widely used form of money within the digital asset ecosystem, just as commercial bank money in the form of bank deposits makes up over 90% of circulating money today.

Deposit tokens can support a variety of use cases as commercial bank money does today, including domestic and cross-border payments, trading and settlement, and provision of cash collateral.

The token form enables new functionality, such as programmability and instant, atomic settlement to speed up transactions and automate sophisticated payment operations.

Deposit tokens also operate as a realistic alternative to stablecoins, on both public and permissioned blockchain environments, and can be offered organically within the regulatory and commercial framework applicable to modern banking institutions.

Their [deposit tokens] technical features, alignment with well-established bank regulatory frameworks, and their natural integration with financial services via the banking sector positions deposit tokens to be a stabilizing anchor within the digital money landscape, while ushering in a new era of enhancement for commercial bank money, the world’s most used form of money.

“In 2020, it cost US $120 billion and on average took 2-3 days in settlement to move US$23.5 trillion across borders.

And while we estimate that a multi-currency CBDC could cut costs by 80%, down to approximately US$20 billion, deposit tokens could unlock similar benefits by reducing fees, settlement times, and counterparty risks, and by enabling more direct funds transfers.”

Fidelity Digital Assets -

Institutional Investor Digital Assets Study: Key Findings

Exploring Institutional Interest in Blockchain Applications and Digital Asset Uses

Report(s): 1)“Institutional Investor Digital Assets Study: Key Findings” and 2) “Exploring Institutional Interest in Blockchain Applications and Digital Asset Uses”

Author: Fidelity Consulting and Strategic Insights with Fidelity Digital Assets and the Fidelity Center for Applied Technology

Published: October 2022 & April 2023

Report Type: Survey

Survey Size: 1,052 total respondents (410 U.S. investors, 359 European investors, and 283 Asian investors.)

Survey Participants: Institutional Investors

Institutional investors surveyed report that the features of digital assets that they find most appealing are the high potential upside, innovative tech play, and enablement of decentralization.

58% of institutional investors responded that they were invested in digital assets globally.

Adoption and consideration of digital assets among those surveyed is highest among high-net-worth investors, crypto hedge funds/venture capital, and financial advisors.

Most investors are split on whether environmental concerns affect their decision to invest in digital assets, with 48% citing “no impact” and 40% “less likely” to invest.

Investors revealed security and safety, ease of use, and regulatory status as the most important characteristics when choosing a digital asset custodian.

Almost 4 in 10 investors indicated they participate in DeFi, with the highest levels of participation in Europe at 50%.

Half of institutional investors surveyed are now familiar with bitcoin mining, up from last year and driven by increases in Europe and the U.S.

42% of institutional investors surveyed find the implementation of a central bank digital currency (CBDC) appealing, up two points from last year, driven by interest expressed from European respondents. CBDCs continue to have the highest appeal among Asian and European investors surveyed.

• 81% of respondents revealed they believed digital assets should be part of a portfolio.

• 74% of respondents planned to buy or invest in digital assets in the future, up from 71% in 2021.

• 51% of those surveyed who had a positive perception of digital assets.

EY Parthenon -

Report: “How Tokenization in Asset Management is Driving Meaningful Opportunity”

Authors: Ernst & Young’s: Sara Elinson & Prashant Kher

Published: May 2023

Report Type: Survey

Survey Size: 329

Survey Participants: Accredited/high-net-worth (HNW) investors (251) and Institutional asset investors (78) in the U.S. See report for full details of participant group*

Asset managers are increasingly interested in tokenization, both at the fund and asset level, due to the multitude of benefits it offers: new sources of capital, increased liquidity, operational efficiency and enhanced portfolio construction.

By the end of 2024, 74% of high-net-worth (HNW) investors plan on investing in tokenized alternatives, compared to only 42% of institutional investors. These percentages jump to 65% for institutional and 78% for HNW investors by 2026.

By 2026, Institutional investors plan to allocate 5.6% of their portfolio to tokenized assets, while HNW investors said they plan to allocate 8.6%.

63% of institutional and 59% of HNW investors ranked private equity as the No. 1 or No. 2 tokenized alternative of interest, with real estate as a close second. 63% of institutional investors would consider investing in tokenized RE investments without voting power if it meant lower investment minimums.

86% of institutional investors ranked alternatives as the top tokenized asset class they would be interested in investing in compared to 62% of HNW investors.

55% of HNW investors want access/better access to alternatives. 45% of HNW investors would be willing to pay higher fees to access direct real estate equity; of these, the majority would pay between 0-50bps.

57% of institutional investors expect lower fees on tokenized assets vs. comparable traditionally issued assets, while 50% of high-net-worth (HNW) investors expect to pay higher fees on tokenized assets if it gets them access to the assets they typically can’t invest in.

• 80% of high-net-worth (HNW) and 77% of institutional investors want distribution of tokenized assets to through traditional financial institutions.

• 56% of institutional investors see increased liquidity as the top driver to invest in tokenized asset. 58% of HNW investors see lower transaction costs as the top driver.

• 49% of institutional investors see uncertain regulatory environment as the No. 1 hurdle for tokenization vs. 24% of HNW investors.

• 42% of HNW  investors prefer ownership of part of a tokenized fund vs. 27% being interested in tokens that represented a single asset. Institutional investors are evenly split on one vs. the other.

Bank of America Securities -

Report: “Beyond Crypto: Tokenization”

Authors: Alkesh Shah & Andrew Moss, Crypto & Digital Assets Strategy, Bank of America

Published: June 2023

Report Type: Analyst Report

Traditional asset tokenization may reach $16tn+, transforming infrastructure and markets over the next 5-15 yrs

Our view is that the tokenization of traditional assets and issuance of assets in tokenized form have the potential to increase efficiencies and reduce costs across an asset's life cycle, improve the efficient allocation of capital, optimize global supply chains, catalyze a new generation of software-as-a-service (SaaS) companies and ultimately drive mainstream adoption.

FIs are increasingly leveraging DLT/BCT, smart contracts and tokenization to enable 24/7 real-time or customizable settlement; reduce credit risk; lower settlement, financing and operational costs; increase liquidity for previously illiquid assets; and allocate capital more efficiently.

DLT/BCT-powered infrastructure may also enable the creation of new and more efficient products and applications that were too expensive or impractical to create on today's financial systems.

Settlement costs are rising ~14% each year and 5-10% of trades fail each day, driven largely by human error and the seven non-interoperable systems for which the average trade is routed, indicating the significant implications that a distributed (shared) ledger enabling real-time, or customizable, settlement provides.

Corporate DLT/BCT use cases are diverse and expanding. Corporates are also incorporating DLT/BCT-powered platforms and tokenization use cases to optimize supply chains, increase customer loyalty, combat counterfeiting and offset contributions to climate change.

• 50%+ of Fortune 100 companies have launched projects leveraging DLT/BCT since the beginning of 2020.

• 27% of settlement systems today still leverage legacy infrastructure that is over 20 years old

• 33%+ of payment data was validated manually in 2020.

• $4tn amount held as collateral that DLT/BCT infrastructure could unlock to be reallocated to yield-bearing assets.

Monetary Authority of Singapore (MAS) -

Report: “Project Guardian - Enabling Open and Interoperable Networks”

Authors: Co-developed and published by Monetary Authority of Singapore and the Bank for International Settlements with contributions from DBS, HSBC, SBI Digital Asset Holdings, UOB, Marketnode, Standard Chartered, and Onyx by J.P. Morgan

Published: June 2023

Report Type: Whitepaper

Digital Asset Project(s): Project Guardian

While much of the public and media attention has focused on the speculation of unbacked digital assets, the real value in the digital asset ecosystem comes from the representation of real-economy and financial assets digitally in a tokenised form using smart contract technology to enhance the efficiency, accessibility, and affordability of financial services. 

Distributed ledgers offer the potential for transactions to be performed on a peer-to-peer basis without centralised intermediaries. Meanwhile, the use of smart contracts to model financial transactions such as borrowing, lending, and trading activities enable financial activities to be performed autonomously.

The advancements in digital technology in the form of digital assets and distributed ledgers hold promise to facilitate the growth of cross-border transactions.

Unless digital asset networks are interoperable, both with each other and with traditional FMIs, fragmentation would reduce the network benefits and can create frictions such as inaccessibility, increased liquidity requirements due to separation of liquidity pools, and pricing arbitrage.

By utilising DLT, structured products that are created digitally can be safekept and distributed using distributed ledgers on-chain, reducing creation and distribution times.

The transformation of trade assets into native digital tokens could broaden the investor base for real economy assets. Additionally, standardisation and automation efforts are expected to bring cost savings in the set-up and ongoing operations.

McKinsey & Company -

Report: “Tokenization: A digital-asset déjà vu”

Authors: McKinsey & Company’s: Anutosh Banerjee, Ian De Bode, Matthieu de Vergnes, Matt Higginson, and Julian Sevillano

Published: August 2023 

Report Type: Article

Tokenization adoption was poised for success six years ago, but progress was limited. Renewed interest might feel like déjà vu, but stronger business fundamentals and structural changes suggest the path could be different this time. In financial services, the emphasis is shifting to the reemergence of a “blockchain, not crypto” narrative.

Tokenization can benefit assets owners, service providers, and/or investors through improve capital efficiency, democratization of access to new pools of capital or secondary markets, operational cost savings, enhanced compliance, auditability, and transparency, and a cheaper and more nimble infrastructure.

Despite the benefits, conditions that pose challenges to widespread adoption to date are related to infrastructure limitations, implementation costs, market maturity, regulation, and industry alignment.

Many of tokenization’s potential economic benefits come to fruition at scale, when a sizable majority of assets or use case volumes have migrated to the new digital infrastructure. However, this will likely require a cost-intensive transition to adapt middle- and back-office workflows not designed for tokenized assets.

Tokenization’s ability to achieve faster settlement times and greater capital efficiency requires instantaneous cash settlement. However, there currently exists no cross-bank solution at scale, despite the progress that has been made on this front: tokenized deposits currently operate only within a single bank, and stablecoins lack the regulatory clarity for now to be considered bearer assets to provide for real-time ubiquitous settlement.

To date, the regulatory framework for tokenization has differed substantially by region or has simply been absent. US players are particularly challenged by undefined settlement finality, lack of legally binding status of smart contracts, and unclear requirements for qualified custodians.

Capital market infrastructure players have yet to signal the concerted will to build out tokenization capabilities or move markets on chain, although their involvement is critical, as they are the ultimate recognized holders of books of record.

While tokenization has yet to achieve the scale needed to deliver on all its stated promises, the ecosystem is maturing, underlying challenges are becoming clearer, and the business case for adoption may be improving.

• $4-5t projected forecast of issued tokenized digital securities by 2030 by Citigroup 

• $120b the approximate amount of tokenized cash now in circulation in the form of fully reserved stablecoins (for example, USD Coin).

• $500b on-chain Stablecoin monthly volumes, according to Stablecoin data from The Block.

RBC Wealth Management -

Report: “Central Bank Digital Currency and the Future of Money”

Authors: Atul Bhatia, CFA

Published: August 2023

Report Type: Analyst Report

Commercial bank accounts and physical cash are likely to remain at the center of U.S. financial architecture for the foreseeable future.

Electronic payments are on the rise as cash usage declines across the globe, leading an increasing number of governments to think about launching digital versions of their currencies.

Central bank digital currencies, or CBDCs, in theory offer faster and cheaper payments, allow people currently outside the traditional banking system access to financial infrastructure, and could reduce settlement risk and delays on international trade.

Despite the hype around CBDCs, we see a host of security, privacy, and governance concerns that we believe outweigh the theoretical gains on efficiency, and we think it would be quite challenging to line up the necessary political support for an aggressive push toward a digital dollar.

We think the Federal Reserve will continue to emphasize incremental technology improvements versus a risky push to transform the payments infrastructure.

• 70% consumers across the world wanting to go cashless vs. currency.

• 42% of respondents, the overall support for launching a CBDC.

• 130+ Central banks piloting CBDC projects as of 2022.

2022 Reports

Accenture -

Report: “The (R)evolution of money III: CBDC is here, careful design needed now”

Authors: Ousmène Jacques Mandeng, Senior Advisor - Global Blockchain Technology at Accenture

Published: March 2022

Report Type: Analyst Report

Though the timing remains uncertain, the introduction of CBDC as a response to new payment needs and in support of greater diversification, competition and resilience in payments is highly likely.

Any CBDC will need to offer, or be compatible with, a solution to connect legacy with DLT enabled payment systems. This would enable seamless payments across payments infrastructures to support payments innovation, choice and diversification while mitigating the risk of fragmentation of the payments environment.

The merger of payment and settlement would replace the conventional payment, clearing and settlement process and enable an important simplification of payment cycles. The use of CBDC as the native payment instrument on token-based financial market infrastructures would offer end-to-end processing in tokens.

Programmability represents one of the key advantages of tokens and equips tokens with features determined by the issuer and irrespective of the holder. The complexity of the business logic can give rise to new payment use cases and can also serve to ensure set prudential standards are met

There is an ongoing debate about account versus value or token-based approaches. While an account-based approach would rest on the existing payment architecture, a token-based approach would represent central bank money in a new digital token format.

CBDC offers an end-to-end, token-based lifecycle for securities and foreign exchange trading. The advantages of instant and atomic exchanges bring significant benefits and efficiency gains for most large value use cases.

Some market participants may be reluctant to adopt real-time settlement as it would require all transactions to be paid in full at execution. Brokers may struggle to make the necessary financing arrangements.

The costs of cash are elevated and incur rapidly, increasing marginal costs with declining usage. For the European Union, the social cost of using cash is estimated at around 1 percent of GDP (Schmiedel, Kostova, & Ruttenberg, 2021).

Financial inclusion remains incomplete in many countries, particularly in lower income countries. CBDC has often been associated with a new approach to facilitating financial inclusion.

Deloitte -

Report: “Digital Assets and Distributed Ledger Technology: Financial Industry Outlook for 2025”

Authors: Deloitte’s: Jürgen Lademann, Ramona Rueckbeil, Prof. Dr. Alexander Schroff, Tilmann Bolze, Jens H. Paulsen

Published: March 2022

Report Type: Whitepaper

“To secure a leading position and competitive advantage in this emerging industry, financial services firms will need to become early adopters and start developing the necessary infrastructure for issuing, trading and investing in digital assets and currencies today.”

From a capital market perspective, there is already a diversified range of digital assets on offer. Four possible product solutions have already emerged as state-of-the-art, market relevant securities based on cryptographic infrastructure: equity funds, ETP variants, special investment funds and securities denominated in digital currency.

Distributed ledger technology has emerged as a market-relevant technology. DLT allows users to distribute transactions across several participants and their network nodes, without the need for a central authority to administer the trades.

The European Investment Bank issued its first EUR 100m tokenized bond on the Ethereum blockchain in April of this year [2022], which has prompted many asset managers to evaluate the technological upgrades they need to integrate distributed ledger technology into their operating model.

Once companies have built internal capacity for and gained expertise in DLT, we expect the biggest benefits from tokenization to come from alternative assets. This is where the market lacks transparency and requires many different internal and external parties for a single transaction, which results in high cost and effort.

Lastly, we expect cryptocurrencies to become part of an investor’s portfolios as a new form of safe haven and an alternative to fiat currencies and central bank policies.

Tokenized funds will offer a compelling alternative to existing traditional, alternative and passive funds, not only because they reduce trading and processing times, but primarily because they lower trading and administration costs.

As we see it, the biggest opportunity for institutions will be to inspire trust within the digital asset space and assure clients that they offer a safe environment for digital asset trading.

Internation Securities Services Association (ISSA) -

Report: “DLT in the Real World 2022”

Authors: ISSA with sponsorship from Accenture, Broadridge and VMware

Published: May 2022

Report Type: Survey

Survey Size: 148  

Survey Participants:

-By segment: Private Bank/Wealth Management (22%), Bank/Custodian/iCSD (22%), Investors (20%), Broker/Investment Bank (16%), Exchange/CSD (12%), Fintech/Neobank (9%)
-By Region: Americas (36%), APAC (25%), Africa & Middle East (4%), Europe (34%)

As DLT experimentation and production continues to scale, nuances around the benefits of DLT in specific usage cases are becoming increasingly central. We’re moving from generic “digital assets” to specific, usage-case-driven applications and benefits.

Live DLT usage has grown by 400% since 2021. In 2021, respondents reported that 8% were using DLT in a live, production environment. In 2022, that number has risen to 32%. Of the remaining respondents in 2021, 21% were in the researching phase, 16% were participating in pilots, and 31% were building [to go live].

When participants were asked which aspects of DLT are users looking to leverage, “instantaneous transactions (‘atomic settlements’)”, “real-time data availability”, and “real time data synchrony” tied as the top choices. Importantly, the benefits of DLT in facilitating digital identity appear to be valued by very few – except for those who have most experience in running DLT projects.

When asked about where DLT is delivering the greatest benefits, respondents indicated that securitised assets were at the top, followed by mutual funds, and private equity. Payments / FX (including CBDC) were ranked as delivering the lowest amount of benefit, just below Equities / ETFs.

For Exchanges/CSDs and Custodians/Banks, 75% of each respectively are building DLT pilots or projects for New product launches. While 58% of Exchanges/CSDs and 48% of Institutional investors are building DLT for internal efficiencies. 

In 2022, the first step for 58% of the industry in building out a DLT business plan is to engage with other ecosystem partners; with 43% of the market also prioritising collaborative market initiatives over self-builds.

From 2020 to 2022, the percentage of respondents facing ‘blocking’ issues, such as access to blockchain talent, in their DLT projects has reduced from 31% to 16%. But as our DLT ambition has grown – other issues have become more acute, such as regulatory limitations and connectivity to legacy infrastructures.

For DeFi, 20% of our [ISSA’s] survey respondents are actively investing resources, with almost 10% committing investment spend in 2022. 18% of respondents have “no interest” in DeFi, while 61% are “actively following DeFi” in order to learn up.

• 50% of the DLT work going on today with dematerialized securities is in the post-trade segment of the asset lifecycle.

• 40% of DLT projects today are between only 2 ecosystem members, 49% with 2-10 and 11% with 11 or more. 

• 53% of DLT usage cases are for commercial deployment in 2022.

• 25% of banks and FMIs blockchain projects likely to use public blockchain vs. 48% of brokers’ and investors’ projects.

Northern Trust -

Report: “Mega Trends That Are Accelerating Change in Institutional Investing”

Authors: Northern Trust

Published: May 2022

Report Type: Whitepaper

“While many trends are shaping the future for institutional investing, three key factors have significant implications for investment managers. The continued growth of alternative and digital assets, an increased focus on achieving cost efficiencies and the influence of data science to shape decision-making will all be important in the coming year,” say Chapman, Pickett and Paulin.

The asset allocation by global institutional investors to real estate, private equity, and infrastructure in the 20-year period has moved from about 7% to above 26%, according to the Thinking Ahead Institute Global Pension Assets Study 2021

Seven in ten institutional investors expect to buy or invest in digital assets in the future, and more than 90% of those interested in digital assets expect to have an allocation in their institution’s or client’s portfolio within the next five years, according to Fidelity Digital Assets 2021 Institutional Investor Digital Assets Study.

Within the alternatives sphere, it is private assets that are seeing the most significant growth, expected to have hit $8 trillion at the end of last year, with investors looking at everything from private equity to private debt, real estate and infrastructure, and from ESG-aligned investments to sustainability-focused and impact investments.

The growth of alternative and digital assets is reshaping the competitive landscape for investment managers. Managers who have lost market share to alternative players will need to look at their value proposition, while those who fail to embrace digital assets may struggle to compete, not only with their current peers, but with new entrants in the future.

Institutional investors across the globe are also consolidating assets in an effort to build scalability, negotiating power, and economies of scale. 

• 57% of respondents in a 2021 Northern Trust Survey said their data strategy included leveraging a central platform for investment data consolidation.

• 5% = the decrease average revenue margins of traditional asset managers between 2015 and 2020, according to Oliver Wyman.

BNY Mellon & Celent -

Report: “Migration to Digital Assets Accelerates”

Authors: CELENT, commissioned by BNY Mellon

Published: October 2022

Report Type: Survey

Survey Size: 271

Survey Participants: Institutional Investors

“97% [of survey participants] agree that “tokenization will revolutionize asset management” 

Most important tokenization benefits are access to new or non-standard asset classes and the immutability and transparency of data. Other benefits include increased liquidity and reduced friction (e.g., faster settlement). Support for fractional ownership and lower costs via tokenization were rated least important.

Singapore and Hong Kong lead in terms of current investing in/exploring tokenized assets, with 75% of investor firms in the region stating they are currently exploring or investing in tokenized assets, compared to 60% in brazil, 53% in uk, 49% in the u.s and 48% in europe.

Benefits of tokenization include removing friction from transfer of value (84%) and increasing access for mass affluent and retail investors (86%)

Private equity and hedge funds are the assets investors would most like to see tokenized.

• 72% would like an integrated provider for all digital asset needs.

• 91% agree that tokenization will revolutionize asset management.

• 63% only comfortable trading tokenized assets with highly rated institutions.

• 70% are willing to pay extra for increased liquidity and faster asset turnover.

Boston Consulting Group (BCG) & ADDX -

Report: “Relevance of on-chain asset tokenization in ‘crypto winter’”

Authors: Sumit Kumar, Rajaram Suresh, Darius Liu, Bernhard Kronfellner and Aaditya Kaul

Published: August 2022

Report Type: Analyst Report

Tokenization of global illiquid assets estimated to be a $16 Trillion business opportunity by 2030.

On-chain asset tokenization helps reimagine the end-to-end process of finding and matching investors with investment opportunities, and the subsequent secondary market opportunities once an investment has been made.

There is an impending shift from traditional fractionalization to on-chain tokenization, which expands the scope of asset classes, stakeholder groups and regulatory scope for tokenization.

On-chain asset tokenization offers six distinct advantages over traditional fractionalization: 1) Improves affordability, enables borderless accessibility, 2) unlocks liquidity and 3) enhances flexibility, 4) enforces immutable transparency and accountability, 5) streamlines transaction efficiency, and 6) ensures better price discovery.

Some risks exist which need to be mitigated to scale up blockchain-based asset tokenization, such as increased regulatory scrutiny, geographical variance and associated uncertainty in governance [that] could lengthen runway for scaling tokenization across borders, lack of concerted programs to improve the nascent investor awareness and adoption, room for technology associated with tokenization stack layers to mature and only a gradual acceptance of tokenized assets from investors.

• 10% of global GDP that will be tokenized market by 2030.

• $5.6b = the projected value of the on-chain asset tokenization market by 2026.

• $150b+ = the trading volume of digital assets as of 2021, up from ~$30b in 2020.  

Onyx by J.P. Morgan, DBS, Oliver Wyman Forum, SBI Digital Asset Holdings -

Report: “Institutional DeFi: The Next Generation of Finance”

Authors: Onyx by J.P. Morgan, DBS, Oliver Wyman Forum, SBI Digital Asset Holdings

Published: November 2022

Report Type: Whitepaper

Digital Asset Project(s): J.P. Morgan Onyx intraday repo solution, Project Guardian (MAS)

“The rapid evolution of blockchain technology and the potential disruption it can bring requires institutions to get ahead of the curve to avoid being left behind.”

The cost savings and new business opportunities of creating a “tokenized” version of real-world assets for transacting through DeFi protocols could be significant for issuers and investors, as well as for financial institutions that can adapt their technology and business models.

Tokenization can reduce settlement risk and decrease settlement times…by enabling so-called “atomic” settlement – the instant exchange of two assets on the condition that assets are simultaneously transferred.

The application of smart contracts in asset tokenization also has delivered a number of benefits, including enhanced and new offerings. For example, J.P. Morgan leverages tokenization to offer intra-day repo solutions for clients on its Onyx Digital Assets platform, and DBS Digital Exchange offers corporates a platform to raise capital through the digitization of their securities and assets, with options to offer smaller denominations.

Safeguards are the key to Institutional DeFi. Safeguards needed to build DeFi-based solutions for institutions include: AML/KYC Risk Controls, Data Privacy, Cybersecurity Protections, Mature Governance and conduct Models, Proper Resource Mechanisms, and Legal clarity around smart contract based business activity.

• $50b = the value of DeFi as of October 2022. 

• $430b in transactions processed by J.P. Morgan’s intraday repo application on Onyx Digital Assets since Nov. 2020.

• 90% of Central Banks that were investigating the potential of CBDCs.

• 26% of Central Banks that were actively developing CBDCs and running pilot projects.

Boston Consulting Group (BCG) & JPMorgan -

Report: “The Future of Distributed Ledger Technology in Capital Markets”

Authors: BCG: Sukand Ramachandran & Steven Kok; J.P. Morgan: Scott Lucas, Allesandro, Michael Jenner

Published: 2022

Report Type: Analyst Report

Digital Asset Project(s): J.P. Morgan’s Onyx Digital Assets Repo. Project

“Capital markets have always driven towards efficiency; the deployment of blockchain technology is just another step in the continuing evolution of the market. We believe that in the current phase of market evolution, blockchain technology is playing a growing role, and it will continue to, becoming a fundamental component of capital markets.” -Scott Lucas, Head of Markets DLT, J.P. Morgan

“Through the securities lifecycle, there are pain points that currently inhibit capital markets efficiency and prevent innovation and growth. These include siloed data structures, large numbers of agents, and entrenched manual processes.”

“While technological change such as electronification has taken capital markets to new levels of efficiency, DLT can go further—offering cost, liquidity, transparency, and innovation benefits. From securities issuance, to trading, clearing, settlement, and securities servicing, DLT’s unique characteristics have the potential to enhance processes across the securities lifecycle.”

“Recognition of the potential benefits of natively issued digital assets has prompted fintechs, banks, and other market participants to embrace DLT partnerships to develop solutions. To realize DLT’s full potential and achieve widespread adoption, DLT platforms must achieve the depth and scale of traditional platforms and meet the needs of issuers and investors.

Market participants have concerns about DLT that include: cybersecurity, risk of fraud, interruptions to network and asset loss, inadequate liquidity, the need for clear regulatory frameworks, and data privacy.”

“We expect the impact will be greatest in asset classes that are either less mature, less digitized, or less efficient. For example, we see much more of a functionality uplift in the $41 trillion corporate bond market, as well as in syndicated loans and securitized products.

J.P. Morgan has utilised its in-house blockchain platform Onyx Digital Assets to facilitate repo transactions and accelerate their settlement. The platform enables repo transactions to be traded, settled and matured within a day, facilitating real-time transfer of cash and collateral and reducing settlement risk for clients.

2021 Reports

KPMG -

Report: “Digitization: 2022 Banking Industry Survey”

Note: This summary slide is reflective of the Digitization & Digital Assets/Crypto Services, and Cybersecurity Sections of this report.*

Authors: KPMG’s: Peter Torrente, Mark Price, Ken Kim, Tim Mahedy, Dylan Roberts, Celeste Diana, Matt Miller, Robert Sledge, David Pessah, Timothy Johnson, Alysha Horsley, Amy Matsuo

Published: May 2022

Report Type: Survey

Survey Size: 100

Survey Participants: Senior Executives

KPMG audit partner Robert Sledge suggests that “banks that stay on the sidelines when it comes to crypto assets and other digital assets may be missing an important moment—so long as they enter the area with a carefully planned strategy.’’

64% said their banks’ customer-facing processes are mostly or fully digitized. 18% said they were not digitized at all or only have some digitized customer-facing processes.

50% said that their back-office processes are mostly or fully digitized.

25% said those processes were not at all digitized or only barely digitized.

In terms of customer-facing processes, 18% said they either were only somewhat digitized—or they were unsure. Regarding back-office processes, 26% said they either were only somewhat digitized—or they were unsure.

81% of bankers in the survey said they expect to see an increase in cybersecurity threats, yet 34% indicate their bank is not investing enough in cybersecurity protection.

While 43% admitted their banks may be ill-equipped to protect customer data, privacy, and assets in the event of a cyberattack, only 47% said their bank is investing more heavily in cybersecurity as a result of the Russia-Ukraine war

The 2022 KPMG Banking Industry Survey Respondents reported their bank is currently offering or planning to offer the following products:

• 92% Blockchain processes to customers.

• 85% Digital Wallets.

• 39% NFTs.

• 18% Crypto trading.

• 15% Crypto bank accounts.

Deloitte -

Report: “Deloitte’s 2021 Global Blockchain Survey”

Authors: Deloitte US Blockchain and Digital Assets: Linda Pawczuk, Richard Walker, and Claudina Castro Tanco

Published: 2021

Report Type: Survey

Survey Size: 1,280

Survey Participants: Senior Executives and Practitioners in the Financial Services Industry across 10 locations: Brazil, China Mainland, Germany, Hong Kong, SAR, Japan, Singapore, South Africa, UAE, UK, and the US.

“More than three quarters of FSI [Financial Services Industry] respondents strongly or somewhat agree that their organization will lose an opportunity for competitive advantage if they fail to adopt blockchain and digital assets.”

Blockchain is driving change in the holistic financial ecosystem, from deposit taking to payments, lending, investing, and trading anything of value. The very nature of financial instruments, from money to stocks, and the infrastructure for any type of transaction is changing—for the better.

Digital assets are a driving force behind the next phase of this evolution, which will be a radical and welcome upgrade from the fragmented, batch cycle, brittle nature of financial products and infrastructure that currently exist.

There is consensus among our [Deloitte’s] cohorts that digital assets will replace fiat currencies in the next five to 10 years. More than three-quarters of overall respondents and FSI respondents (76%) believe the changeover will occur

Approximately 6 in 10 overall survey respondents identified regulatory barriers among the biggest obstacles to acceptance of digital assets.

Overall survey respondents expect to see significant positive impact on their organizations or projects from a variety of digital asset types: Stablecoins or central bank digital currencies (42%), Algorithm-driven stablecoins (38%), Enterprise-controlled coins (33%)

• 81% of respondents agree that blockchain technology is broadly scalable and has achieved mainstream adoption.

• 45% of respondents said that custody represented a “very important” role for digital assets in their respective organizations, ranking as the top role. 

• 71% of respondents said that cybersecurity is the biggest obstacle to the acceptance & use of digital assets globally, followed by 63% citing regulatory barriers as the biggest.

• 44% of respondents said that digital assets will have a “significantly positive” impact for more efficient processes (e.g. faster payments) as well as greater compliance and transparency.

Any Questions?

Send an email to info@vertalo.com and visit our website, vertalo.com

The integration of distributed ledger technology (“DLT”) into asset management will usher in a wave of innovation, transforming the way various asset classes can be tracked, traded, and managed. This technology, commonly known as blockchain, offers enhanced transparency, trust, auditability, and efficiency in handling different types of asset data, particularly in situations where multiple counterparties and intermediaries are involved. The adoption and implementation of this technology will unleash a diverse range of use cases of distributed ledger technology in asset management across equities, debt, private equity, venture capital, wealth management, and non-financial assets.

DLT simplifies asset management by creating a shared ledger of asset data with immutable and auditable records. This allows robust verification and audit of data stored on chain or supplied from off-chain sources.  As distributed ledgers are append-only databases, they allow for a permanent record of ownership and all changes to ownership since issuance, which aids in reconciliation, audit, and compliance with securities law.

Smart contracts add programmability to DLT, and support automation of many aspects of asset management, including payments, disbursements, trading, purchase, redemption, etc. Smart contracts can also work with non-ownership data, such as shareholder votes, corporate actions, regulatory reporting, and the like.

DLT brings transparency, liquidity, and efficiency to the traditionally opaque private equity and venture capital industries. By providing a verifiable and immutable history, DLT ensures that all parties work from the same golden source of data. DLT transforms wealth management with transparent and auditable records of investment, widening the scope of possible services to meet growing client demands.

DLT extends beyond financial assets to include non-financial assets like real estate, manufacturing equipment, carbon credits, art, and collectibles. Tokenization facilitates authentication, fraud protection, and chain-of-custody tracking, making high-value assets more accessible to a broader range of investors. Auditable ownership records on DLT help to ensure regulatory compliance and adherence to reporting standards. 

Vertalo’s distributed ledger technology consists of Vertalo Securities Protocol (“VSP”), and an API-based architecture.  As an SEC-registered transfer agent, Vertalo leverages its platform to address a wide range of use cases in multiple asset classes. VSP facilitates DLT use cases in asset management across two dimensions; the need for a transfer agent, and the spectrum of blockchain capabilities. Vertalo is purpose-built for this type of flexibility, as each asset class and user profile will have different requirements.

Distributed Ledger Overview

Distributed ledgers provide the foundation for issuing, exchanging, and tracking digital representations of ownership and other data with immutable records. In the context of contemporary blockchains, this has taken several forms, from transactional cryptocurrencies to non-fungible tokens to proof of existence for off-chain data.  These immutable records support a wide range of use cases in finance and asset management. 

DLT confers numerous advantages to traditional capital markets infrastructure.  At its core, DLT is simply an append-only database that is shared as a network among its participants, which allows for high fidelity record keeping.  Many DLT networks also offer smart contract capabilities, which allow for tokenization as well as automated or conditioned transaction types.  Smart contracts can mimic traditional exchange models, lending models, and other representations of traditional financial services and products. 

This activity can occur on highly decentralized public networks, or can be adapted to private or permissioned networks.  The factors that determine the choice of chain are jurisdictional regulation and user demand. The benefits of using distributed ledgers for recording ownership and transactions remain unchanged, however the benefits could be further optimized given the use case.

Transparency: DLT offers an immutable and auditable record of any data stored on chain, including ownership, transactions, and signatures for off-chain data. Common access to these data ledgers on chain reduces the need for intermediaries and eases the process of synchronization among multiple parties.  Each on-chain record is visible to all ledger users, and each can see changes in real-time. Further, ledger data can be shared with regulators, auditors, and other approved 3rd party compliance partners.

Auditability: The cryptographic nature of DLT ensures that records are immutable and history is preserved. This immutable history supports robust audits, and creates trust in the reliability of the data. Cryptographic signatures combined with out-of-band data exchange extend auditability to data passed through off-chain means. Any member of the network can verify data based on the immutable records read on-chain.

Efficiency: Automated data verification based on data stored on-chain reduces the complexity and increases the efficiency of data sharing among network participants. Verifying off-chain data using on-chain cryptographic proofs streamlines processes that rely on trusted data synchronization, such as settlement, clearing and settlement of trades, reconciliation, asset management operations, and audits of large data sets, reducing administrative complexities and costs.

Liquidity: DLT integrates well with digital securities technology (SEE VSP WHITEPAPER), enhancing API-based data exchange (SEE API WHITEPAPER) with an immutable audit trail for trading data. The fractional ownership made possible by digital securities, where bid size and increment are smaller, benefit the most from the increased efficiency of data synchronization and audit. 

Decentralized Finance (DeFi): Smart contracts that represent ownership on-chain can implement lending, borrowing, and derivatives programmatically. This emerging area of development can bring new efficiencies to real-world assets represented in tokenized form.

Distributed ledger technology is revolutionizing asset management across various asset classes. From equities and debt to private equity, venture capital, wealth management, and non-financial assets, DLT is enhancing transparency, auditability, efficiency, and liquidity. 

Asset Management Industry Background

The Asset Management (“AM”) Industry is a large and diverse market, encompassing a range of asset classes, investment strategies, and customer profiles.  With an estimated $115T in AUM as of FY’22, the AM industry represents an integral part of the global economy.  In this context, asset managers are facing new challenges with global uncertainty, rising interest rates, market volatility, expanding regulatory regimes, and heightened operating costs.  Asset managers are faced with a growing cost-income ratio, with the greatest impacts felt among smaller asset managers.  While this sets the stage for consolidation in the industry, large firms must increasingly invest in technology solutions for better investment outcomes and stronger profitability profiles.

A regulatory picture that is ever increasing in scope and cost drives much of the Operating Expenditure (“OpEx”) in the AM industry.  Additionally, fee pressure and growing complexity in both portfolio construction and client demands present additional challenges.  Asset Managers are increasingly looking to novel technology to innovate and address these pressures, including growing expenditure on third-party technology solutions. 

With regards to DLT, AM firms are seeking to capitalize on the benefits of integrating chains into their data-management platforms, to gain efficiency and also enhance functionality, while remaining compliant with applicable regulations.  In response to growing customer demand, institutions are testing a wide range of applications of DLT across numerous asset classes and operating activities. As DLT continues to mature, asset managers have an opportunity to embrace and leverage this technology to reshape the future of asset management.

DLT Use Cases In Asset Management

Distributed ledger technology provides numerous advantages in several categories in the AM industry. The immutable append-only nature of distributed ledgers represents a step forward in verifying transactions, while providing significant advantages in auditability. With the addition of smart contracts, which serve as the basis for tokenization and automated transactions, asset managers can enhance their offerings without driving significant marginal operating costs. 

The fundamental difference between tokenized assets and their traditional counterparts lies in how ownership is 'represented.' Conventional assets rely on systems controlled by specific issuers, transfer agents, broker dealers, and custodians, often resulting in fragmented processes that require third-party intermediaries and costly manual reconciliation and remediation. This hinders efficiency, interoperability, and the potential for innovation.  In contrast, tokenization leverages public or private distributed ledgers to create a shared source of ownership data, eliminating fragmentation and simplifying synchronization across all ledger users. As a result, efficiency is heightened, interoperability improves, and the environment for innovation becomes more favorable.

Similar uses of DLT apply to non-ownership data in asset management. The DLT provides a common basis for verification and audit of data shared among parties responsible for different aspects of asset management.

There exists a range of applications for DLT in AM, each leveraging various aspects of DLT functionality.  Using DLT to store ownership data or non-ownership data, the evolution in asset-management infrastructure will drive efficiencies across a broad range of AM activities.

Shareholder Ledger Management

Perhaps the most foundational level of asset management begins at the capitalization table. The record of asset ownership is the most fundamental element of Asset Management - who owns what and how much of it. Great strides have been made by AM firms in recent decades to digitize these asset ownership records to do away with the paper-based, friction-laden processes of the past. However, inefficiencies still abound with inconsistent data formatting and structure across different systems, both between internal departments and among third parties the AM firms must work with, such as custodians, fund administrators, and transfer agents.

As an ownership ledger, DLT allows multiple parties to verify the data independently, thereby enhancing trust and efficiency in cap table management across all parties. In addition, DLT provides a shared data structure and format, and a common point of reference for transactions that affect the cap table ownership records.  This golden source of truth reduces risks and liabilities associated with cap table management, and provides opportunity for automation to reduce administrative costs.

Equities

Distributed Ledger Technology streamlines the administration of equities by establishing an immutable, decentralized, permanent ledger that records ownership and transactions, building on cap table management features.  DLT supports on-chain payment mechanisms. Combining DLT payments with DLT cap table management allows fully programmatic settlement of equities, thereby shortening settlement periods (typically several days for traditional equities) and reducing the associated counterparty risk. Further, these technologies can support automated dividend disbursement  while maintaining the verifiability and auditability for all parties..

Smart contracts can automate data management for both ownership and non-ownership data. Stock splits, shareholder voting, and recording of other corporate actions can be automated through smart contracts on a DLT platform, making these processes more transparent and auditable

DLT can similarly simplify regulatory compliance by maintaining an immutable record of all transactions. This immutable history makes audits more straightforward and ensures greater transparency in reporting.  Additionally, real-time trade surveillance can be conducted more broadly on a DLT platform, helping to identify and prevent market manipulation, insider trading, and other types of fraud.  DLT can also help asset managers create more transparent and easily-auditable investment products, such as tokenized funds that can be traded on secondary markets.

Debt

In debt markets, DLT offers enhancements for bond issuance, trading, and oversight. The transparency and auditability benefits of using DLTs for equities apply equally to debt instruments, where multiple parties contribute to origination, trading on the secondary market, handling interest disbursements, and regulatory compliance. These benefits can lead to lower operational expenses and increased liquidity within debt trading ecosystems.

Trading in the secondary debt markets often lacks transparency, making it difficult to establish fair value for debt instruments. The visibility from DLT enables more transparent pricing and trade verification, allowing asset management firms to more appropriately mark their debt portfolios to market in order to better anticipate valuation swings in uncertain interest rate periods.

Smart contracts on a DLT platform can automate interest payments on debt instruments that otherwise require manual processing and verification, ensuring timely and accurate interest payments to bondholders.

The transparency offered by DLT can provide better data for risk assessment. This can result in more accurate pricing and lower risk premiums, reducing the overall cost of borrowing.

Private Equity & Venture

Through its immutable history of ownership and investment, Distributed Ledger Technology offers a reliable and secure method for monitoring ownership percentages, streamlining the capital-formation journey, and improving communication with investors in the context of private equity or venture capital. Using DLT to record ownership of interest in a fund lets smart contracts automate manual processes, such as onboarding, capital calls, distributions, redemptions, and reporting.

Wealth Management

DLT can apply in the field of wealth management through its provision of a clear, verifiable history of investment portfolios. Both financial advisors and investors benefit from transparent insights into asset distribution, portfolio performance, risk assessments, and regulatory reporting. Wealth managers that use DLT-compatible technology may also gain access to a wider range of investable asset classes, including tokenized assets and cryptocurrencies.  This allows wealth managers to meet the evolving needs of clients without significantly increasing administrative costs.

The transparency of DLT can support more fully informed decision-making, both for wealth managers and their clients. The immutable nature of DLT makes it well-suited for compliance with increasingly stringent financial regulations. Everything from customer onboarding to transaction history can be securely and transparently logged, streamlining the auditing process, and helping wealth managers to better assess risk and adapt investment strategies accordingly. This can result in better asset allocation and potentially higher returns.

As client demand for exposure in a widening range of asset classes grows, tokenizing assets like real estate, art, or other illiquid investments can make them more accessible to a broader range of investors. By turning these assets into tradable tokens on a DLT-based platform, wealth managers can offer new investment opportunities to their clients.  Smart contracts on DLT can automate the creation and management of customized financial products. This reduces the administrative burden and allows wealth managers to bring a greater variety of options to their markets.

Real Estate

The benefits of DLT extend beyond financial assets to include non-financial assets like real estate. Often seen as an opaque and cumbersome traditional market, real estate stands to gain much from the transparency, efficiency, and automation that DLT offers.

Much of the cumbersome nature of the real estate market stems from due diligence in title transfer. Recording on DLT the history of titles, liens, easements, encumbrances, restrictions, covenants, property condition reports, zoning regulations, and so on makes them part of a permanent and verifiable record, making subsequent diligence less arduous and more efficient. The fact that properties go through repeated diligence makes this a high-return benefit.

Tokenization of real estate data can be extended to include not just ownership information, but also leasing and occupant information. Recording leasing and occupancy data on the blockchain can provide additional benefits including automation of payments or disbursements as with debt instruments. 

Other Non-financial Assets

In industries like agriculture, manufacturing, equipment leasing, and pharmaceuticals, DLT can trace the entire lifecycle of a product. This verifiable chain of custody reduces risk by making it easier to identify counterfeits or compromised goods and easier to ensure authenticity and proper handling. DLT can also serve as a verifiable and immutable registry for copyrights, patents, and trademarks. In the leasing of large equipment such as aircraft, medical equipment, ships, and more, putting leasing data including ownership records, lessee records, payment schedules, and location of the equipment ensures accuracy in the tracking of these assets and the leases associated with them by asset management firms, avoiding costly efforts like data reconciliation and payment collections.  As these assets are frequently purchased, sold, and collateralized, the benefits of DLT in equity and fixed income assets apply equally to these cases.

DLT can track the production, transfer, and retirement of renewable energy credits in a transparent way. This can encourage sustainable practices by ensuring that credits are only counted once and are allocated accurately.  

Authenticators of high-end products like fine art and luxury goods can use DLT to record findings and history. Each product can have unique, immutable records that demonstrate its provenance and ownership.

Decentralized Finance

Decentralized finance (“DeFi”) is an emerging area of DLT in finance that employs smart contracts to provide traditional financial products and services.  While DeFi to date has largely consisted of unregulated, permissionless, and globally accessible platforms, the same technology can be adapted to permissioned environments or private networks that allow participants to maintain regulatory compliance.  DeFi smart contracts implement protocols for lending, borrowing, trading, automated portfolio management, payments, dividends, derivatives, and peer to peer asset transfers.

An emerging subsector in DeFi is the Real World Asset (“RWA”) category, which allows for issuers and asset managers to use their tokenized assets as collateral in lending markets, create decentralized exchange markets for assets, generate income on their assets, or gain exposure to a wide range of investment opportunities.  The integration of DLT enables asset managers to take advantage of these opportunities and efficiencies with minimal marginal cost to operations and administration.

Conclusion

Many strides have been made in order to improve markets and operational processes and expenses in the asset management space through digitization efforts of assets and transactions. These markets and processes can be and are being further improved through the introduction and integration of DLT. DLT provides a single, immutable source of truth - the proverbial ‘golden source’ - when it comes to the data of securities, real world assets, and non-financial assets to increase the reliability and accessibility of these records and to decrease friction and OpEx. Reductions in verification and reconciliation have proven downstream effects in cost savings for asset management firms in their asset servicing, structured product, and portfolio management business units.  

References

https://www.bcg.com/publications/2023/technology-and-operations-in-wealth-and-asset-management

https://rsch.baml.com/access?q=s-i517792VNkDKydHLEioQ

https://www.strategyand.pwc.com/de/en/industries/financial-services/saving-a-bundle-on-banks-data-costs/saving-a-bundle-on-banks-data-costs.pdf

https://www.strategyand.pwc.com/de/en/industries/financial-services/asset-management-2022/strategyand-asset-management-study2022.pdf

https://www.vertalo.com/whitepapers

https://web-assets.bcg.com/1e/a2/5b5f2b7e42dfad2cb3113a291222/on-chain-asset-tokenization.pdf

https://www.gfma.org/wp-content/uploads/2023/05/impact-of-dlt-on-global-capital-markets-full-report.pdf

https://research.binance.com/static/pdf/real-world-asset-report.pdf

Download the Blockchain Use Cases report Going Beyond Cryptocurrencies along with our whitepapers at vertalo.com/whitepapers.

Since the early days of Wall Street, when telegraphs delivered stock quotes from New York to Boston and curbside brokers traded off-book on the street outside the NYSE, there has been a persistent pursuit to create order out of chaos in the financial markets. This mission over the years has introduced third parties to participate and decrease risk in capital markets such as custodians, central securities depositories, clearing houses, and Transfer Agents.

A Transfer Agent (“TA”) records the ownership of a securities issuance. They issue and cancel certificates, add and remove trading restrictions on securities, record transfers of securities ownership, and more. Non-bank transfer agents generally are regulated by the U.S. Securities and Exchange Commission pursuant to rules adopted under Section 17A and 17(f) of the Securities and Exchange Act of 1934 (“Exchange Act”). 

Fulfilling these responsibilities once required the creation of physical stock certificates with seals of authenticity, information about the issuer, and signatures from corporate officers that were mailed to investors or their broker or custodian. Many of the inefficiencies this process introduced have been mitigated with the introduction of electronic record-keeping of “book-entry,” meaning non-certificated, securities. However, by no means did this rid the TA and broader capital markets system of friction.

Most TAs now use some form of ledger software to maintain securities ownership records, which alleviates some but not all of the burdens of investor data management. Although electronic, these instanced books often still require manual entry, adjustments, and data sharing. Though these systems solve many of the integrity and operational struggles of the days of telegraphs and physical vaults, there is of course always still room for improvement as our technological world continues to advance. The process of manual entry and maintenance within these systems creates inconsistencies and errors that hold up securities transactions, especially in private markets. In particular, data sharing among other market participants - such as fund admins, alternative trading systems, custodians, and brokers - often proves difficult in the process of ETL (extract, transform, load) of data between disparate systems of firms.  

The most obvious solution to these problems is to utilize a software platform that automatically and instantly validates and shares data with a similarly equipped counterparty. A computerized ledger with adequate and automated checks and balances yields better reconciliation and interpretation than even the best hands on keyboards. 

For these reasons and the others detailed in this paper, Vertalo designed and purpose-built their platform from inception as a “Digital Transfer Agent.” 

The Vertalo ledger platform is API-first and blockchain-enabled, creating technical integrations with all of the market participants listed above and, moreover, can be implemented within an institution’s own secure computing environment. The platform solves many of the inefficiencies of manual data entry, transport, and validation for private capital markets by serving as a Golden Source for securities and asset ownership records for issuance, secondary trading, and more.  

Introduction

In recent decades, Financial Institutions (“FIs”) have grown exponentially in the complexity of assets, trading mechanisms, and global reach. Transfer agency and private asset data management stand as crucial backbones of the financial system. However, despite their importance, these two areas have been starved of adequate technology investment, resulting in unnecessary cost and systemic friction.

Problem: Antiquated Data Management Practices

The evolving financial landscape demands sophisticated technological solutions to cater to the intricacies of TA operations and private asset data management. However, legacy systems and traditional practices remain prevalent within many FIs, leading to several notable inefficiencies and challenges.

This section covers the following challenges presented by the lack of investment into private markets data management:

• Incompatible Infrastructure

• Data Silos and Fragmentation

• Lack of Standardization

• Inefficient Data Reconciliation and Management Processes

• Compliance and Regulatory Challenges

• Integration Challenges

Incompatible Infrastructure

At the core of most TAs is an infrastructure that has only received minimally consequential updates for decades due to established mainframes and security concerns. Such outdated, legacy systems can lead to slow transaction times, increased error rates, and an inability to integrate with newer, emerging technologies. These legacy systems often rely on manual processes, which are both labor-intensive and also prone to human errors. TAs and some legacy systems can utilize APIs but still struggle with systems integration due to incompatible datasets, over-fetching of data, and lack of customization or augmentation. Many APIs utilized today are traditional REST APIs, which are easier to use and appropriate for simple data sets, but are prone to over-fetching and often inferior to GraphQL query language, which is built for large, complex data sources like shareholder and security data. Queue messaging middleware infrastructure, commonly used in FIs, provides a streamlined mechanism for asynchronous communication, allowing systems and applications to efficiently exchange vast amounts of data. This is particularly useful for ensuring timely and reliable data transfer in a high-volume, high-velocity financial environment. However, when it comes to transfer agency and private asset management, there are distinct downsides. Middleware can sometimes introduce latency, leading to potential discrepancies in real-time data, which can be problematic for asset managers requiring instantaneous insights. Furthermore, while queuing ensures that messages are processed, it does not inherently guarantee the order in which they are processed, which can be critical for certain financial operations. The abstraction introduced by middleware can also reduce the granularity and immediacy of control, making it challenging to address specific transactional nuances or unique requirements intrinsic to private asset management and TA operations.

Data Silos and Fragmentation

A major challenge in the current TA and private asset management sphere is the prevalence of internal data silos. FIs often operate multiple, disjointed systems for functions such as trading, asset management, TA, brokerage, etc. This fragmentation can result in inconsistencies, discrepancies, and challenges in consolidating data for comprehensive analysis, which is critical as TAs must share data with the other operators servicing securities issuances, whether these departments are internal or external to the organization. In an era where integrated insights are the key to decision-making these silos and their lack of interoperability present a considerable bottleneck.

Lack of Standardization 

FIs employ a multitude of platforms, APIs, protocols, etc. The absence of standardized data formats complicates data interchange/exchange between institutions.  Although many TAs and legacy systems utilize APIs, interoperability challenges still exist due to lack of API standardization or ability to efficiently generate new, compatible APIs. This lack of standardization compounds the inefficiencies, often requiring manual intervention to reconcile data discrepancies.

Inefficient Data Reconciliation and Management Processes

TA operations require meticulous reconciliation to ensure accuracy in the representation of securities ownership and transaction histories. Legacy systems often entail manual or semi-automated reconciliation processes being  used for this purpose which are both time-consuming and also susceptible to human error. These inefficiencies can lead to regulatory infractions, disputes, and diminished trust from clients. Additionally, private assets, by nature, do not have the same liquidity and transparency as public instruments. Data management of private assets is often fragmented across multiple departments or divisions within an FI. Poor data sharing capabilities and lack of interoperability leads to opaque views of asset information or NAV, delayed reporting, and potential misvaluation.

Compliance and Regulatory Challenges

The ever-changing regulatory landscape puts added pressure on FIs. Outdated systems hinder prompt adaptation to new regulations. Delay in adopting new compliance measures exposes institutions to legal risks and also potential financial penalties.

Integration Challenges

Adoption of emerging technologies such as blockchain has surged at FIs. Legacy TA and asset management systems often lack the flexibility to integrate seamlessly with these new technologies due to native complexity of their mainframe architecture. This gap can cause FIs to miss out on the benefits these technologies can offer in efficiency, auditability, and cost savings.

The Solution: An API-Based Platform with Flexible DLT Capabilities

The significance of efficient and secure data management cannot be overstated. As FIs grapple with increasing volume and complexity of ownership and transactional data, the need for streamlined (and implementable) solutions becomes paramount. The combination of API-based interoperability with the immutable and trustworthy nature of Distributed Ledger Technology (“DLT”) offers a most cost-effective and scalable alternative, especially compared to the antiquated technology offerings within traditional transfer agency platforms and private asset data management.

API Integrations and Interoperability

APIs have revolutionized the way disparate systems and platforms share and exchange data. In the context of FIs, this interconnectivity enables real-time data access and seamless integration across relevant departments or divisions within an FI’s TA and asset management operations.

By eliminating the need for manually-triggered data transfers or cumbersome batch processes, FIs can substantially reduce operational costs. Data sharing and exchange via a standard API integration minimizes (or eliminates) the risks associated with human error, leading to fewer financial discrepancies and corrections.

The ability to exchange data or update ownership and transactional records rapidly across systems means that FIs can react more promptly to market changes, client requests or regulatory requirements. This enhanced agility translates into more timely (less costly) decisions and streamlined, automated back-office TA and asset management operations.

Enhanced Reconciliation and Immutability 

Blockchain offers superior transparency, security, and traceability when compared to spreadsheet or centralized database approaches. When applied to TA and private asset management operations, DLT can ensure that each transaction or data modification is chronologically logged and visible to all permitted parties. This form of logging is often referred to as a time-stamped ‘state database’.

Properly designed and implemented, blockchain-enabled ledgers obviate the need for manual, time-consuming data audit processes, leading to direct cost savings. The immutable nature of DLT can reduce fraudulent activities or discrepancies which results in lower indirect costs related to dispute resolutions and compliance penalties.

DLT’s immutability reduces the time and resources dedicated to audit and compliance checks. The inherent trust and transparency in the ledger means fewer delays in transaction approvals and settlements. The transparency also ensures that all parties have a shared, accurate view of data, eliminating time-consuming, back-and-forth email or phone call communications. 

The Fully Digital Transfer Agent: APIs and DLT 

Integration of API-based systems with DLT creates a robust platform for transfer agency and private asset data management. FIs benefit from both the agility of API-based interconnectivity and the auditability of blockchain.

A platform combining these capabilities reduces redundancy in data management, and improves  efficiency in data transfer and asset transaction/ownership verification, thereby reducing operational costs.

For FIs, implementing a system that integrates with their current infrastructure and supports real-time data updates, coupled with the trustworthiness of DLT, means that decisions are more informed, quicker, and based on a Golden Source – a single, private source of truth for all asset and transfer data. 

FIs that adopt these solutions will benefit immensely in terms of cost reduction and operational efficiency, positioning themselves firmly ahead of their competition. But the capital requirements to hire for and build such a platform internally make FIs hesitant.

Vertalo has already built this platform, and is the only solution that can provide the capabilities of a Golden Source, implemented securely within an institution’s own secure cloud infrastructure.

Vertalo built its Digital Transfer Agent and Shared Ledger platform as a cost-effective solution for FIs to implement and deploy within the FI’s cloud architecture, providing the needed capabilities while protecting proprietary data privacy. 

Vertalo’s Digital Transfer Agent

Vertalo’s APIs, database, and Vertalo Securities Protocol (“VSP”) provide FIs with the tools and capabilities for fully digital systems interoperability, efficient and automated data management, tokenization, and compliance for TA and private asset management operations, while satisfying the strict data privacy policies that FIs operate under. 

By adopting Vertalo’s Digital Transfer Agent, FIs should expect:

• Reduction in OpEx: Reduced need for manual intervention leads to a decrease in operational costs.

• Improved Client Experience: Faster and more accurate services lead to improved client satisfaction.

• Speed and Scalability: Automated data management leads to scalable volumes of transactions without a proportional rise in operational complexity.

Digital Transfer Agent Functionality

The Transfer Agent Role

The TA role within the platform offers FIs several advantages within back-office TA and asset management operations.  

• Staged Transfers via API

• API-Based Custom Reports

• Power of Automation

• Ease of Review and Execution

Staged Transfers via API

Instead of manually inputting and processing transfers in individual or bulk transactions, Vertalo’s Digital Transfer Agent platform allows for transfers to be “staged”, meaning injected into the system for compliance review and execution, automatically via API by third parties such as issuers, brokers, custodians, etc. Automated staged transfers can offer more control over the transfer process, efficient operations, better tracking, and the potential for more secure transactions. The use of Vertalo’s APIs can further automate this process, making it easy to integrate with other systems and platforms used by third parties, without the manual intervention of extracting data, securely sending files, and injecting the data once again into the TA’s system.

API-Based Custom Reports 

Vertalo provides tools to generate reports customized according to the needs of FIs through the use of GraphQL APIs rather than the limited REST APIs of legacy systems. REST’s architecture and approach is appropriate for APIs exchanging simple data sets due to ease of use, but is prone to over fetching data and lacks precision for complex data sets. GraphQL is a query language designed for precise data fetching and handling, which enables precision and accuracy of data sharing. Custom reporting can assist in understanding data better, deriving actionable insights and making more informed decisions. This customization can lead to better decision-making processes and improved results.

Power of Automation

Automation, in this context, refers to the capability of performing tasks with minimal to no human intervention after the initial setup. Automation results in faster transactions, fewer manual errors, and a more streamlined experience overall. For FIs handling vast amounts of data and transactions this is a game-changer.

Ease of Review and Execution

The design of the platform promotes straightforward review processes and easy execution of tasks. Simplified review and audit processes significantly reduce time spent on verification and validation. Easy execution ensures that tasks and processes are completed swiftly and without undue difficulty.

Regulatory and Compliance Support

Regulatory compliance remains paramount for ensuring market stability and fostering investor trust. Central to this compliance infrastructure is the implementation of rules adopted pursuant to Section 17A and 17(f) of the Exchange Act, which dictates the key responsibilities and roles of TAs, especially concerning recordkeeping, safeguarding of funds, and prompt processing of transfers. Vertalo meticulously designed its Digital Transfer Agent platform to map directly to crucial TA and other securities regulations.

Vertalo’s Digital Transfer Agent incorporates advanced recordkeeping capabilities, serving as a comprehensive ledger for (tokenized or non-tokenized) securities transactions (or any asset transactions). With an emphasis on accuracy, traceability and security, Vertalo generates and makes available an immutable audit trail, ensuring that compliance requirements set forth under SEC Rule 17Ad under the Exchange Act are consistently met. Furthermore, the Vertalo Securities Protocol implements a Controller Function, that ensures that tokenized assets also uphold key elements of securities regulations.

Vertalo’s enterprise-grade solution combines both innovative technology and a deep understanding of regulatory nuances, positioning it as the leader in harmonizing Digitized and Tokenized Capital Markets with established securities regulations.

Service Models

Vertalo’s innovative approach to transfer agency and asset management will revolutionize the financial services industry through the flexibility and capabilities of its Digital Transfer Agent. Recognizing the diverse needs of FIs, Vertalo offers three distinct service models, ensuring flexibility and adaptability in today’s security-conscious environment.

Vertalo TA

When acting as the TA of record, Vertalo takes on the full responsibility for overseeing the entire record-keeping process of securities ownership, changes, and transfers. This model provides FIs with the assurance that a dedicated entity is managing the intricate details, while they focus on their core competencies.

Sub-TA

When acting as a Sub-TA (aka, Transfer Agent Service Company), Vertalo supports an FI’s existing TA of record, operating under the existing license of the primary Transfer Agent. In the Sub-TA role, Vertalo offers a layer of specialized services, expertise, and technology to complement and enhance existing back-office TA and asset management operations. This partnership with the TA of record ensures seamless operations while tapping into Vertalo’s technological advantages (APIs and VSP).

TA Platform

For FIs seeking to harness Vertalo’s cutting-edge technology without a full suite of managed services (such as the Vertalo TA and Sub-TA services models), the TA Platform Model is ideal. FIs license and integrate Vertalo’s full technology stack into their own systems, thereby enabling a robust digital asset data management, streamlined TA operations and efficient (and reliable) data handling across relevant departments and divisions. The TA Platform Model is well suited for larger, security-conscious enterprises because Vertalo only acts as the Transfer Agent Technology Provider, allowing enterprises to manage their own operations and data while leveraging Vertalo’s APIs and VSP tokenization. The enterprise has the full capability of a Shared Ledger and a true Golden Source for TA and asset management operations fully integrated with their other systems and living inside their security perimeter.

Deployment Models

Vertalo supports three different cloud deployment models to satisfy client use cases. The Vertalo Cloud model uses a shared, Vertalo-hosted platform. The Enterprise Cloud model provides a dedicated, Vertalo-hosted platform. The Client Cloud model is a dedicated platform deployed within the client’s own cloud account. A client may use one or more of these models in parallel, e.g. Enterprise Cloud for sandbox and Client Cloud for production. Read more about these deployment models in “The Vertalo API Standard.” 

Under any of these deployment models, FIs benefit from the unparalleled adaptability of Vertalo’s Digital Transfer Agent. Vertalo’s Digital Transfer Agent reduces redundancy and operational complexity,  and also introduces advanced tools for systems interoperability. Furthermore, Vertalo’s emphasis on efficient data management, asset tokenization, and rigorous compliance protocols equips FIs to navigate the evolving landscape of TA and asset management back-office operations with confidence and precision.

Vertalo Database: Transfer Agent Ledger and Data Segmentation

Properly categorizing and managing data is essential in ensuring the efficiency, clarity, and integrity of information within any Shared Ledger or database. Vertalo’s approach to data management segments data into purpose-built ledgers tailored to the specific data they handle: General Ledger (Golden Source), Blockchain Ledger, Alternative Trading Systems (ATS) Ledger, and TA Ledger.

Segmenting the data into purpose-built ledgers structures each data type in alignment with its unique requirements. Segmenting data into purpose-built ledgers increases efficiency, aids in maintaining data clarity and integrity, and simplifies maintenance of comprehensive data history. Data retrieval, auditing, and management become more straightforward when each ledger is optimized for its specific data type. This approach also facilitates separation of concerns, reduces the possibility of data contamination and leaks by cleanly segregating distinct data types with different access criteria.

• Transfer Agent (TA) Ledger: Specifically for TA data.

• ATS Ledger: Tailored for ATS data.

• Blockchain Ledger: Blockchain specific data.

• General Ledger (“Golden Source”) : A comprehensive ledger, syncing data with all other ledgers and capturing a broad history of data.

Transfer Agent Ledger

The data types associated with the TA Ledger support back-office TA and asset management operations.

Investor Information

Personal and financial data relating to the individual or institution investing. This includes names, addresses, tax identification numbers and more.

Number of Shares

The quantity of shares held by an investor.

Restrictions

Any restrictions placed on the sale or transfer of shares, potentially due to regulatory constraints, company policies, or investor agreements.

Issuance Events

Events where shares and other assets are issued to investors.

Share Settlement

Events that finalize the transfer of shares and the issuance of shares to the buyer.

Benefits of TA Ledger and Data Segmentation

Enhanced Efficiency

Organizing data into its distinct types and storing them in purpose-built ledgers supports quicker data retrieval and processing, optimizing back-office operations.

Improved Data Integrity

Properly-segmented data is less prone to errors, misinterpretations, or potential overlaps, ensuring a higher level of data accuracy.

Optimized Private Asset Management

Clear structure and categorization simplify the asset management process by ensuring that all necessary data points are readily available for effective decision-making and operational tasks.

Enhanced Security

Segmenting data by access type simplifies creation and maintenance of security protocols. Separating data accessible to different users makes it easy to apply use-specific controls to the data.

FI Use Case: The Golden Source

In an era where digital transformation is dominating boardroom and conference panel conversations, Vertalo gives FIs a cost-effective means to increase their speed to market through the innovative solutions of Vertalo’s Digital Transfer Agent. Vertalo’s platform is a differentiated solution tailored for the burgeoning (but massive) private asset market, offering advanced tools for TAs, tokenization, API development/standards, and private asset data management. By licensing and embedding Vertalo within their cloud infrastructure, FIs can expedite market growth and speed to market, and also orchestrate a more cohesive and interconnected private asset ecosystem. In doing so, they position themselves at the vanguard of market standards, demonstrating leadership and vision in an ever-changing landscape.

The unique proposition of Vertalo’s Digital Transfer Agent and Shared Ledger platform lies in its focus on integration, reliability, and privacy. Through these capabilities, the platform ensures that data integrity and security remain uncompromised. 

Moreover, the Shared Ledger acts as a Golden Source - a singular, authoritative repository of private asset data. Whether employed within a single FI or across an extensive network of such entities, the ability to consolidate, access, and share a trustworthy source of data streamlines processes and mitigates potential discrepancies. As a result, FIs confidently navigate the complexities of the private asset realm, harnessing the full potential of tokenization and digitization, as well as ensuring unparalleled transparency and reliability for stakeholders.

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