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Gary Gensler, the incoming chairman of the US Securities Regulatory Commission, will promote the application of blockchain and encrypted digital assets in the US securities industry. Among the various measures the SEC will take, a new type of encrypted digital asset registration license will be set up to promote the development of industry infrastructure. Among the various obstacles to the development of encrypted digital assets on a global scale, the lack of digital asset registration agencies is one of the biggest obstacles to the development of the industry. Only after such a core infrastructure is established can the real encrypted digital asset industry thrive.
In the mainstream securities industry, there are securities registration and custody companies to ensure that the company’s stock rights are consistent with the transaction accounting in the market. In other words, the Apple stock traded in the US securities industry can truly correspond to the various rights and interests of Apple stock. Such a securities registration company is a core infrastructure component of every securities market. Because of the importance of such a registered custodian company, it is usually defined as a systematically important financial institution (SIFI). The operation of such an organization must never be interrupted. If it interrupts normal operations, financial markets will not function properly.
Blockchain technology provides a new market infrastructure for the financial industry by means of distributed accounting. On top of it, digital currency and digital assets will be generated and circulated. The production and circulation of such new forms of currency and assets must operate within the scope of supervision. In the current US market, US financial regulation has clearly indicated that the market can issue and circulate US dollar digital stablecoins under the premise of compliance. Therefore, the next stage in this development direction is how to generate and circulate digital assets under compliance conditions.
Blockchain technology has already supported the customization and circulation of various types of digital financial products. Such digital financial products include company equity, real estate ownership, private equity fund shares, and artwork ownership, etc. In order for these new digital financial products to circulate and trade on the blockchain, there must be a mechanism to ensure that the actual rights and interests correspond to their encrypted digital forms one-to-one. The natural choice in this regard is an encrypted digital asset registration company.
In the current U.S. securities market, institutions that perform registration include DTCC and companies that hold transfer agent licenses. DTCC is responsible for the registration and custody of all listed stocks in the United States. Companies with a transfer agent license can register and custody the equity and other rights of those unlisted companies. In the current U.S. security token industry, companies with a transfer agent license provide actual rights and interests corresponding to their digital forms.
For the SEC led by Gary Gensler, one of its possible options in this regard is to establish a new type of encrypted digital asset registration license. Participants in the existing market, whether it is DTCC or a company with a transfer agent license, can apply for this license to carry out this registration business. Another option for the SEC is to make a policy statement stating that DTCC can also provide digital asset registration services within the scope of its current responsibilities. I think the SEC is likely to set up a new type of encrypted digital asset registration license, instead of giving this business to existing licensees. This is because the application range of encrypted digital assets is wider. It will not be limited to securities products, it needs more industry participation to ensure that such institutions fully play their role.
Institutions that obtain digital asset custody licenses will be under the direct supervision of the SEC and CFTC. This is because it covers not only securities, but also commodities and other types of assets, so it should be under the direct management of these two financial regulatory agencies.
Such an organization is likely to be a non-profit membership organization. Its organizational form will be similar to that of the Options Clearing Corporation in the United States. It is jointly owned by industry members. Members jointly determine the operation and operation of this company. The company’s business is to provide infrastructure services for members and the industry, so it is a non-profit company.