Yesterday, the House Financial Services Committee held a hearing to review the tokenization of securities. It is inevitable that securities will go digital, and tokenization, leveraging distributed ledger technology to issue, manage, and trade securities, is quickly being adopted. Yet, questions remain.
Tokenization and the Future of Securities: Modernizing Our Capital Markets
Richard Baker, CEO & Founder of Tokenovate, shared his opinion on the hearing, stating that the current approach lacks a deeper structural shift in post-trade markets and explaining that tokenization exposes long-standing inefficiencies, where faster processing doesn’t automatically improve certainty. Tokenovate is a platform that automates post-trade, collateral management, and tokenized settlement for derivatives and securities.
“The discussion in Washington is still anchored on whether tokenised securities should fit neatly within existing regulatory frameworks, which is a necessary step, but ultimately a narrow one that risks missing the deeper structural shift underway,” says Baker.
He states that tokenization does not necessarily introduce new risk but exposes challenges already embedded in the fragmentation of the post-trade ecosystem. When a tokenized asset is forced throug the “same disjointed lifecycle,” there is not a transformation but rather an “acceleration of existing friction.”
“What’s largely absent from the debate is a serious focus on how these instruments settle, how lifecycle events are coordinated across participants, and how liquidity is mobilised in real time,” says Baker. “If policymakers continue to focus on form rather than function, they risk standardising inefficiency. The real opportunity is to define outcomes, ensuring settlement is synchronised, data is consistent, and markets can operate with certainty at speed.”
