Six US companies, including the bank Wells Fargo, Arm Holdings and Intuit, have objected to the tokenisation of their shares on a platform planned by the crypto exchange OKX and the Intercontinental Exchange (ICE). The total number of companies objecting has now reached 22.
Tokenisation is the creation of a digital token on a blockchain that represents a company’s share. The partners planned to tokenise 63 shares, but the growing number of objections is complicating the project’s launch.
Who objected and the scale of the project
Microsoft, Alphabet (Google’s parent company), Goldman Sachs and McDonald’s had previously objected to the tokenisation of their shares. Of the 22 companies that have objected, 16 are listed on Nasdaq and the remainder on the NYSE.
Among the six new objections were Wells Fargo, Arm Holdings and Intuit. The OKX and ICE platform was intended to allow trading in digital tokens that represent traditional shares and are recorded on a blockchain.
Companies’ concerns
A regulatory filing does not explain each company’s specific reasons, but chief among the risks cited are fragmentation of trading and liquidity. If shares and their tokens are traded on different venues under different rules, trading activity could be split between them and make it harder to determine a fair market price.
Companies also point to potential additional volatility and a loss of control over the trading environment due to round-the-clock token trading. One company referred to uncertainty about how the new format would affect share prices, liquidity and volatility.
Regulatory regime and the objection mechanism
In early October OKX and ICE applied to the U.S. Securities and Exchange Commission (SEC) for approval of a bespoke regulatory regime for tokenised trading. The regime would allow platforms to operate without complying with some of the requirements that apply to traditional stock exchanges.
Under the proposed framework, tokenised shares would retain the rights and privileges of traditional securities, including dividends and voting. The platform is required to notify the issuer in advance of its intention to list a tokenised version of the issuer’s shares and may not proceed if the issuer objects.
