Testimony on Tokenization and the Future of Securities: Modernizing Our Capital Markets

Summary

SIFMA President and CEO, Kenneth E. Bentsen Jr., delivered testimony at a hearing before the U.S. House of Representatives Committee on Financial Services entitled Tokenization and the Future of Securities: Modernizing Our Capital Markets

Excerpt

Introduction

Chairman Hill, Ranking Member Waters, and distinguished members of the Committee, thank you for the opportunity to testify today on tokenization and the future of the U.S. securities markets. My name is Ken Bentsen, and I am the President and CEO of the Securities Industry and Financial Markets Association ("SIFMA"). ¹

The United States leads the world with the deepest, most liquid capital markets built on a foundation of robust investor protection and market transparency and integrity. The undergirding of that foundation is the most technologically sophisticated market infrastructure that ensures robust operational resiliency proven to deliver maximum execution quality and efficiency including during periods of extreme stress. Our markets' quality and growth, including operational efficiency, are the result of constant investment in new technology and processes to better serve clients. As such, SIFMA and its members strongly support innovation in the securities markets and believe new technologies such as distributed ledger technology ("DLT") and tokenization offer many potential benefits for the U.S. While still nascent, tokenized securities products are growing rapidly, with the global market value of tokenized real-world assets now exceeding $26 billion-up by 280% over the
past year alone. This includes more than $11 billion in tokenized Treasury debt and in excess of $1B in tokenized products based on U.S. equities and ETFs. ² Our members - broker-dealers, investment banks, and asset managers, and other industry participants including exchanges and clearing agencies, have been investing in integrating DLT for more than a decade to determine how such new technologies could benefit investors, issuers and other market participants across the securities lifecycle. This includes enhancing market infrastructure, increasing investor access and choice and supporting more efficient capital formation.

At the same time, the continued strength of the U.S securities markets depends on preserving the investor protections and market integrity safeguards that provides the trust and confidence. That strength and efficiency provides for lower cost and greater availability of capital for issuers, broader access and liquidity for investors, and supports retirement savings, business investment, and economic growth. Indeed, our capital markets fund three-quarters of U.S. economic activity ³ , making them essential to the ability of governments, businesses, and consumers to fund their activities - whether that be a company looking to invest in new plant and equipment, a local government seeking to raise funds for infrastructure projects, or a family taking out a mortgage to buy a home. Robust capital markets also provides American workers with opportunities to invest and prepare for retirement, directly and through investment vehicles like 401(k)s and pension funds.

As SIFMA has emphasized across a series of submissions to the Securities and Exchange Commission ("SEC") ⁴, our securities markets thrive because of, not despite, long-standing regulatory frameworks that protect investors and ensure market quality and integrity. The goal of policy makers should be to modernize markets in a way that builds on these strengths rather than bypassing them. Developing a durable approach that is built on existing regulatory frameworks will provide the necessary foundation for the growth and development of tokenized securities markets, enabling innovation to flourish and new operating models to develop while also protecting investors and ensuring that our markets remain the envy of the world.