Kraken and SEC concludes meeting on legal framework for tokenization

Officials from crypto exchange Kraken have concluded a meeting with the US Securities and Exchange Commission’s Crypto Task Force, where they discussed asset tokenization. 

According to a memorandum published by the SEC, several members of the agency’s staff met with four representatives from Kraken’s parent company, Payward Inc., and its affiliated brokerage arm, Kraken Securities LLC. 

Two legal advisors from Wilmer Cutler Pickering Hale and Dorr LLP also attended, which means the meeting extended beyond just technical implementation and dove into regulatory interpretations.

Why did the SEC meet Kraken?

The meeting focused on Kraken’s proposed tokenized trading system and the broader framework necessary to operate such a platform under US securities law. 

Further, SEC and Kraken also explored the potential benefits of tokenisation, a topic gaining traction as more financial firms test blockchain-based models for asset issuance and trading.

Lately, the agency has been under a lot of pressure to address the risks and rewards of tokenised equities, which has drawn platforms like Kraken into formal talks on the next steps.

Several traditional financial associations have called on the SEC to tighten oversight of these digital products, citing the absence of investor protections typically found in conventional markets. 

Tokenised equities — which can be traded 24/7 — often bypass many of the restrictions that apply to their traditional counterparts.

Kraken remains one of the few major crypto exchanges actively offering tokenised stocks. 

Back in May, the company introduced a service enabling non-US users to trade blockchain-based versions of popular US equities around the clock.

Since then, Kraken has expanded that offering across multiple networks.

For instance, on August 20, Kraken revealed that it would integrate its tokenised stocks — known as xStocks — with the Tron blockchain.

The move was part of a broader collaboration with tokenisation infrastructure provider Backed and the TRON DAO and allowed users to deposit and withdraw tokenised stocks like Apple and Tesla directly on Tron as TRC-20 tokens.

The market still has room to grow

As of press time, the market for tokenised stocks remains relatively small compared to the broader tokenised asset ecosystem.

If we look at data from RWA.xyz, the total value of tokenised equities in circulation stands at just $360 million, which marks a drop of 11% over the past 30 days.

That’s a mere 1.35% of the $26.5 billion in real-world assets currently hosted on public blockchains.

Yet, that hasn’t stopped firms from doubling down on the opportunity, as they seek to lead what could become one of the most active blockchain-based financial markets.

Robinhood, for instance, began offering tokenised versions of US equities to users in the European Union on June 30, tapping into round-the-clock trading demand in a region with lighter regulatory friction.

Coinbase is also moving in, but with a different strategy.

The exchange has gone after formal regulatory approval to launch tokenised equities in the US, making it a “huge priority” under the current SEC administration. 

While it has yet to confirm a formal filing, the company is reportedly pursuing a no-action letter, a key prerequisite for launching the product without triggering enforcement action.

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