Investment firm Bernstein warns in their latest report that the application of outdated securities laws may hinder the growth and transformation of the crypto sector. The report argues that such laws fail to consider the fundamental nature of blockchain networks, which aim to revolutionize the financial and securities market systems with increased transparency, instant settlement times, disintermediation, automation, reduced costs, global liquidity, and interoperability.
Bernstein’s analysts led by Gautam Chhugani emphasize that labeling all tokens, except Bitcoin (BTC), as securities neglects the potential for blockchain networks to achieve decentralization over time and for tokens to possess functional utility within the network. This view has significant implications for the ongoing lawsuits between the U.S. Securities and Exchange Commission (SEC) and major crypto exchanges Binance and Coinbase.
The report raises an important question about whether countries should rely on securities laws that were established decades ago, disregarding the transformative nature of blockchain technology. This approach, according to Bernstein, results in a fragmented global landscape, with jurisdictions recognizing the opportunity to attract talent and capital by adopting progressive regulatory frameworks. The U.K., Europe, Hong Kong, Singapore, and the Middle East are already taking steps to establish themselves as crypto hubs while the United States grapples with regulatory uncertainty.
Additional support for the potential of tokenization has come previously from Citi Bank, which predicts that the tokenization of real-world assets will be the next “killer use case” in the crypto world. Citi Bank’s analysts project that the market for tokenized real-world assets could reach a staggering $4 trillion to $5 trillion by 2030, representing an 80-fold increase from current levels. Private equity and venture capital funds are expected to be the most tokenized asset class, capturing 10% of the total addressable market, followed by real estate at 7.5%.
Moreover, a survey conducted by BNY Mellon reveals that 70% of institutional investors would increase their digital asset activity if reputable institutions offered services like custody and execution. The survey indicates that institutional investors prefer a cautious and legal entry into the cryptocurrency market rather than speculative approaches.
Considering these developments, it is evident that the future of tokenization and the crypto sector depends on regulatory clarity and the adoption of forward-thinking frameworks. The findings from Citi Bank and BNY Mellon in the recent past and now Bernstein have highlighted the vast potential for tokenization to revolutionize traditional asset classes and attract institutional investors. However, without adequate regulatory support, the growth and adoption of blockchain technology could face significant hurdles, potentially impeding the transformation of the financial and securities markets.