Speaking at the 30th Annual International Institute for Securities Market Growth and Development, Uyeda emphasized how technology has streamlined securities transactions, reducing costs and increasing efficiency.
SEC's Mark Uyeda on Tokenization
In his remarks, Uyeda noted the evolution from physical securities certificates to digital transactions.
“Another way that we can learn from, and cooperate with, each other is through technology. Modern capital markets have the advantage of technology, which has significantly reduced costs and made the capital markets more efficient,” Uyeda stated.
He pointed out that countries in Europe, Asia, Africa, and Latin America have completely phased out physical certificates, leveraging technology for faster and more cost-effective settlements. The US has also benefited from these advancements, moving towards a T+1 settlement cycle for equity securities.
Uyeda identified tokenization as a key technological advancement with the potential to enhance market efficiency. Tokenization involves converting asset rights into digital tokens on a blockchain. This process promises greater security, transparency, and immutability in transactions. It could also reduce the need for intermediaries, further lowering transaction costs.
However, Uyeda stressed the importance of regulators understanding the costs, benefits, and risks associated with tokenization. He referenced the UK Financial Conduct Authority's (FCA) ongoing efforts to explore tokenization for FCA-authorized funds. The FCA's detailed research and interim reports provide a valuable blueprint for other regulators considering similar steps.
The FCA's approach underlines the necessity for thorough research and cautious implementation to protect investors while fostering innovation. Uyeda emphasized the importance of global regulatory cooperation in navigating the challenges posed by emerging technologies.
“As technology continues to evolve, regulators will face new and challenging issues. It is important that we continue our regulatory cooperation in order to advance our shared goal of protecting investors and facilitating capital formation,” he concluded.
By embracing technological advancements like tokenization, Uyeda suggests that capital markets can achieve greater efficiency and security, benefiting both investors and the broader financial ecosystem.
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