Aaron Kaplan warns that synthetic tokenized stocks may undermine U.S. investor trust and disrupt capital markets.
Aaron Kaplan, founder of Promethum, has raised alarms about the implications of synthetic tokenized stocks for U.S. investors, suggesting they could undermine trust in American capital markets.
Tokenization Sparks Controversy
The ongoing clash between AMC CEO Adam Aron and Robinhood's Vlad Tenev highlights the tensions surrounding tokenized stocks—digital representations of company shares that do not provide actual ownership. Aron has accused Robinhood of unauthorized tokenization of AMC stock, labeling the practice as unethical. Tenev counters that such permission is unnecessary, as the demand for U.S. equities from international investors is significant.
These synthetic stocks, described as "debt securities" from a Robinhood subsidiary, mimic stock prices but do not convey real ownership. This structure, often referred to as a "wrapper," allows trading to occur offshore, disconnecting it from the actual U.S. markets and misrepresenting demand for the underlying shares.
Market Impact and Regulatory Response
While Tenev sees vast potential in opening U.S. markets to millions of international investors, the practice of synthetic tokenization poses risks to American investors. Currently, nearly 200 U.S. companies are involved in this tokenization, with projections suggesting the market could reach $2.7 trillion by 2030, leading to significant opportunity costs.
In a recent regulatory move, the SEC clarified its stance by excluding synthetic tokens from its "innovation exemption" for tokenized securities. SEC Chairman Paul Atkins emphasized that tokenized assets must represent real ownership and grant the same rights as traditional securities, such as dividends and voting rights. This ruling also addresses concerns raised by companies like AMC regarding unauthorized tokenization.
A Vision for Authentic Tokenization
Kaplan advocates for a model where tokenization occurs as a digital twin of actual shares held by the Depository Trust Company (DTCC). This approach would ensure that tokens represent real ownership and remain within the established U.S. market framework, thus enhancing investor confidence.
He argues that maintaining trust in U.S. markets is crucial, as synthetic tokenization could erode that confidence and disadvantage domestic investors. Authentic tokenization could connect American companies with a broader pool of capital, ultimately invigorating U.S. markets and attracting international investment.
Kaplan concludes that while international investors will seek access to U.S. equities, the right approach to tokenization could lead to a new era of investment in American capital markets, reinforcing their reputation as the most reliable in the world.
