The U.S. House of Representatives Financial Services Committee held a hearing on Wednesday to consider the regulation of securities tokenization. Question marks regarding former President Donald Trump’s family’s investments in the cryptocurrency sector also came to the fore at the meeting.
Lawmakers on the committee largely agreed that tokenized securities should be subject to similar regulation as traditional securities today. Paul Atkins, Chairman of the US Securities and Exchange Commission (SEC), stated that his institution is preparing to announce the draft regulation in this field in a short time.
Uncertainties and Risks in Regulation are Discussed
Committee chairman French Hill stated that financial markets are on the verge of a significant transformation. Hill pointed out that new technologies may bring risks and regulatory gaps. Committee members emphasized that maintaining market integrity will continue to be a priority.
The session focused on how tokenization will be integrated with traditional market dynamics and how audit processes will continue to operate. Additionally, various concerns have been raised regarding authentication, anonymous wallets, and legal ownership, especially with DeFi structures. Democratic members pointed out that tokenization increases the risk of “gamification” of transactions in exchange applications.
“As a committee, we have previously examined how investment applications turn investment into a game with behavioral designs. Tokenization can make these transactions continuous and faster with less control,” said Maxine Waters, expressing her concerns.
Sector Representatives Are Active, New Partnerships Stand Out
Blockchain Association CEO Summer Mersinger stated that the cost and transaction burden is reduced by eliminating intermediaries in blockchain-based tokenization. Mersinger argued that in the SEC’s regulatory approach, the intermediary function and infrastructure providers should be clearly separated and liabilities should be determined accordingly.
Mersinger said in his statement: “In the regulatory approach, a clear distinction should be made between those who have custody, control and disposition authority and those who do not.”
The Senate is currently working on a bill that is expected to bring clear rules regarding the digital asset market. In this process, it was stated that the SEC will offer “innovation exemption” to be able to test new technologies without the need for registration at the first stage. Currently, industry companies have started to develop tokenization platforms without regulations.
Ken Bentsen from the Securities Industry and Financial Markets Association emphasized the importance of ensuring that new entrants to the industry are subject to the same rules as existing companies. Highlights of the week included BlackRock CEO Larry Fink stating in his annual stakeholder letter that digital assets could update the workings of the financial system, Franklin Templeton’s tokenization partnership with Ondo Finance, and Invesco beginning to manage Superstate’s tokenized Treasury bill fund.
However, Democratic members drew attention to transparency problems, claiming that the Trump administration was taking steps in favor of the sector and that the family had direct investments in the sector. It was reported that the company called World Liberty Financial is also a shareholder of the Trump family and that it made an agreement with Securitize to tokenize the revenues related to hotel projects.
Maxine Waters commented, “It is estimated that the Trump family has earned approximately $1 billion from digital asset investments. The fact that public officials try to regulate the markets in which they benefit raises debates about legitimacy.”
Salman Banaei, who previously served in the SEC and Commodity Futures Trading Commission and currently manages the legal department of Plume, also pointed out that the relations between the Trump family and the industry cast a shadow over the transparency of the regulatory process.
