ST0x: Tokenised assets need clearer and more harmonised rules
Greater harmonisation and regulatory clarity would support further strong growth in the tokenised assets market, new research from ST0x shows.
Its study found almost two-thirds (63%) of institutional investors and wealth managers say tokenised assets would become mandate eligible if they were SEC registered, while almost half (48%) believe tokenised assets would be mandate eligible if the associated trading venue was licensed.
The global study - covering 200 institutional investors and wealth managers – found 42% say they are more likely to invest if the instrument has a prospectus approved by an EEA regulator, while 26% would like to see sponsorship or backing by a global systemically important bank, the research across North America, the UK, continental Europe, the Middle East and Asia Pacific found.
The research across North America, the UK, continental Europe, the Middle East and Asia Pacific found firms would value a single approved instrument which is distributable across multiple EEA jurisdictions. Nearly two out of five (38%) say this would remove a significant compliance burden, while more than half (55%) say it would make a moderate difference.
When asked what would be most likely to increase their firm’s traded volume in tokenised securities over the next year, 29% of professional investors say automatic and predictable corporate action handling across all event types. More than a quarter (27%) say named, regulated custody of the underlying with independent verification.
Just under one-fifth (19%) of study participants say a legally enforceable claim on the underlying security would most increase trading volumes in tokenised assets, while 17% say approval by an EEA or equivalent regulator. Six percent cited deeper secondary markets and tighter spreads while 3% said lower transaction costs.
The biggest potential regulatory changes in the next 24 months that would concern tokenised asset investors highlighted by the survey is divergence between US and EU treatment creating fragmented liquidity cited by 39%. Just over a quarter (27%) say instruments being reclassified after allocation has been made, while 25% point to enforcement action against a major venue or issuer. Just 7% say the continued absence of any clear framework would be the biggest concern.