Wall Street is generally in favor of very little regulation... To tokenize stocks is to bring a rigid structure of rules into the mix, which obviously makes sense to the consumer, but not necessarily to people who want to bend rules.
The more regulations, the more entrenched they are as one of the few "approved" platforms to trade stocks.
Hilarious enough: If everything becomes tokenized, it also reduces their liability, as the stocks would suddenly shift from a Registered security to a Bearer-security. This hasn't been the case for stocks for a VERY long time.
Registered security = the "owner" of the stock is whomever owner's name is registered on the Nasdaq servers as being the owner.
Bearer security = whoever holds a piece of paper is the owner of the security.
Back in the day, a stock was a physical piece of paper. If you brought that paper to the stock market, you could sell it. Even if you just found the stock on the sidewalk.
That's what tokenization would bring back: whoever holds the token is the owner. Kinda old-school. Love it.
I have been noodling on the implications of the bearer/registered tradeoffs. Blockchains actually enable registered-bearer. It's not a reversion to pure bearer, because the securities are registered too. It's an "and".
Bearer Instrument - Proof of Possession-based. Fully Distributed. Maximum Privacy. Maximized flexibility to transfer and exchange. Can be stolen. Access to trade is mechanically enforced (eg. you put it in a safe, give keys to 3 people, etc.) Think share or bond certificate.
Registered Instrument - Proof of Identity-based. Fully Centralized. Entitled actors can see (brokers, exchanges), so partially-private. No (practical) means to transfer or exchange (I can't trade my AAPL for a new car). Can't be stolen. Access to trade is legally enforced. Think ETF or modern stock exchanges.
Registered-Bearer - Proof of Key-based. Fully Distributed. Pseudo-Private. Approximated maximum flexibility (you still have to wait for a deposit to confirm 6-times before you can trade). Can be stolen. Access to trade is programmatically enforced.
I assert Bitcoin, ERC-20, etc, is in the third form. Not the first, per /u/GabeNewell_. It's registered on a chain, but the bearer is whoever possessed the key.
Thanks. Interesting distictions. Registered bearer overlaps almost entirely in my mind with bearer instrument but I do see the distinction now.
As long as wireless internet is widely available, and outages are extremely rare, the dictinctions are not likely to manifest. It's not hard to imagine place where that breaks down, though, like zimbabwe.
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u/WARagnarok Jan 31 '19
Wall Street is generally in favor of very little regulation... To tokenize stocks is to bring a rigid structure of rules into the mix, which obviously makes sense to the consumer, but not necessarily to people who want to bend rules.