By Hannah Lang
WASHINGTON, Oct 23 (Reuters) – Six more companies, including Wells Fargo, Arm Holdings and Intuit, will not allow their shares to be tokenized on a joint trading platform backed by crypto exchange OKX and Intercontinental Exchange, according to a regulatory document seen by Reuters.
The new objections, which have not been previously reported, underscore the growing challenges for tokenization, the creation of digital tokens that represent a stock and can be traded on a blockchain similar to cryptocurrencies, despite the US securities regulator recently approving the novel products.
In total, 22 companies have objected, according to the document, which outlines the rules of the OKXICE venture and which companies have objected. It does not say why the companies objected.
Sixteen of the companies, including Microsoft and Alphabet, are listed on Nasdaq. The others are listed on the New York Stock Exchange, which ICE owns.
Spokespeople for Arm and Intuit did not immediately provide comment. A Wells Fargo spokesperson declined to comment.
TOKENIZATION ADVOCATES TOUT 24/7 TRADING
The cryptocurrency industry has said stock tokenization could revolutionize markets by allowing shares to be traded 24/7 and settled instantly. OKX and ICE had planned to tokenize 63 stocks through their joint venture, dubbed OKXICE, but have encountered objections from issuers.
OKX and ICE filed with the US Securities and Exchange Commission earlier this month to launch tokenized stocks under the agency’s new innovation exemption. The exemption allows platforms that facilitate trading of tokenized stocks to operate without complying with many requirements that apply to traditional stock exchanges.
Under the exemption, platforms must notify companies before listing tokenized versions of their stocks, and cannot proceed if the issuer objects.
Speaking to reporters this week, Andrew Cuomo, co-chairman of the OKXICE joint venture, said given how revolutionary tokenization could be, it was natural for companies to take a “wait and see” approach, CoinDesk reported.
While Nasdaq says it welcomes tokenization in principle, it has said such products should be subject to the existing set of rules and investor protections. It has warned that if improperly regulated, tokenization could fragment liquidity and undermine price discovery, among other issues.
“Given the risks we believe issuers must be cautious about their participation,” the company warned in a September FAQ.
A Nasdaq spokesperson pointed Reuters to its FAQ.
Although many overseas tokenized stocks are marketed like stocks, they rarely offer the same rights, disclosures and protections as traditional equities.
Under the SEC’s exemption, tokenized stocks must confer the same rights and privileges as traditional securities, including the ability to receive dividends and exercise voting rights.
(Reporting by Hannah Lang; editing by Michelle Price and Rod Nickel)
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