Originally published on: November 28, 2024
In a world where tokenization could revolutionize financial markets in the United States, flawed rules have hindered its widespread adoption. However, with President-elect Donald Trump showing signs of being crypto-friendly, there is a historic opportunity to lead the way in changing the landscape.
While ending the cryptocurrency crackdown in America is a positive step, it is not enough. To truly allow tokenization to flourish, Trump’s team, including potential crypto czars and the Commodity Futures Trading Commission chair, must overhaul existing regulations. This entails merging the best elements of traditional markets with the innovation of decentralized finance (DeFi).
The challenge lies in balancing investor protections, such as Know Your Customer (KYC) checks, exchange oversight, and custody rules, with the advantages offered by tokenization. This requires a strategic approach that does not necessitate new laws but rather a reevaluation of current frameworks right from the start of Trump’s term.
Tokenized real-world assets (RWAs) hold the promise of enhancing various aspects of securities markets, including securities like stocks, bonds, and mutual funds. Programmable smart contracts and public blockchain ledgers can offer increased transparency, automate trade settling and reporting, and ensure token holders’ autonomy. The advantages are recognized even by the US Treasury Department, which is contemplating tokenizing US Treasury bills.
Despite the potential of security tokens, their traction remains limited, accounting for only $12 billion in total value locked. This figure barely scratches the surface of the $30 trillion addressable market for security tokens, according to industry experts.
The major hurdle lies in outdated investor protection laws that are struggling to adapt to blockchain technology. Integrating decentralized identity protocols and incorporating decentralized exchanges into the US financial markets are crucial steps in overcoming these challenges.
With the support of Trump’s administration, the industry could witness groundbreaking changes that pave the way for a more secure and efficient market. As the landscape continues to evolve, seizing this opportunity could transform America into the world’s crypto capital in the years to come.
Author: As a senior writer for Cointelegraph, Alex O’Donnell brings a wealth of experience from his background in financial journalism and DeFi development. His insights offer a unique perspective on the intersection of traditional markets and blockchain innovation.
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