Bullish, Alpaca and Apex fintech form an alliance to promote issuer-backed securitization of token

The tokenization of publicly traded U.S. stocks is moving from concept to reality, and a controversy surrounding shareholder rights has made the establishment of industry standards even more urgent. Cryptocurrency exchange Bullish recently spearheaded an industry consortium whose members include institutions such as Alpaca and Apex Fintech Solutions with the goal of establishing unified standards for tokenized shares that ensure investors on the chain do not have economic leverage without shareholders' rights.

Controversy erupts over AMC CEO's encounter with Robinhood

The coalition was formed in the wake of a public disagreement between AMC Entertainment CEO Adam Aron and trading platform Robinhood over whether synthetic assets or tokenized products could give investors access to economic returns on a stock, but not the same legal rights as registered shareholders, such as voting rights.

For retailers, this is not just a technical detail. If the token holders are not real shareholders, then their rights and interests in terms of voting at the general meeting, corporate communication, etc., are ambiguous.

Bullish CEO Tom Farley commented: "The architecture we have now established is critical, and that's why we brought these leading companies together to plan the direction. The issuer-supported tokenization model has been seen as a way of filling this gap by linking tokens directly with an issuer's shareholder directory".

From interoperability to industry standards

Alpaca, a fintech infrastructure company, plans to promote the interoperability of traditional securities markets with on-chain ones through its Instant Tokenization Network.

Arush Sehgal, Head of Digital Assets at Alpaca said: "Tokenisation creates opportunities to connect issuers with investors in a way that traditional market infrastructures cannot. To do this means retaining shareholder rights and ensuring the on-chain market remains connected to its dependent markets".

Another member, Apex Fintech Solutions, primarily provides infrastructure for financial institutions such as broker-dealers. The company believes that the alliance will help establish relevant standards to allow tokenized markets access to existing financial systems. For the industry, this means that in the future tokenised stocks may no longer be an isolated or parallel market segment but rather embedded extensions of the existing securities system.

Regulatory easing is key

The pace of the consortium's work is directly related to recent policy changes by the U.S. Securities and Exchange Commission (SEC). According to the Consortium, the SEC had just approved an exemption arrangement allowing limited on-chain trading in listed American stocks under certain conditions.

This exemption opens up compliance channels for tokenized U.S. stocks, but also places accompanying requirements on the industry: there must be clear answers to questions such as scalability of chain transactions, shareholder rights ownership and linkage with traditional clearing settlement systems. The alliance chose to form at this time precisely because it wanted to seize an opportunity in developing standards.

Follow-up

The actual impact of this alliance remains to be seen: whether it will attract more issuers and form a standard recognized by regulators is still unknown. However, the direction has been clear that competition for tokenized U.S. stocks is shifting from being able to trade in bullion coins to whether or not trading mechanisms are equivalent to real shares.