See below for an excerpt from a recent Crypto Long & Short newsletter from CoinDesk. In the piece, RDC founder and CEO Ankit Mehta discusses how depository receipts are the original form of tokenization and how they should be applied to tokenized infrastructure today, providing a scalable and legally sound foundation for modern equities.
Tokenization has significant potential to transform capital markets, promising real-time settlement, broader investor access and greater programmability across financial infrastructure. But while the rails are evolving, current models for tokenized equities remain fragmented, opaque and misaligned with the safeguards that define the traditional securities markets.
Today, two dominant approaches exist:
The wrapper model involves tokenized IOUs that provide synthetic exposure to existing equities rather than direct ownership. These tokens do not grant holders any governance rights or enforceable claims to the underlying shares. Transferability is typically restricted to closed ecosystems, liquidity is siloed across issuer-controlled platforms and regulation can be murky, with many products not available to U.S. persons.
The on-chain issuance model means creating a native digital share class issued via blockchain. While this approach aligns more closely with the legal definition of security, it introduces operational complexities and scalability challenges. Active issuer participation is mandatory, liquidity remains fragmented between the on-chain tokens and traditional securities and broker-dealer standards are inconsistent, complicating participation for regulated financial institutions and investors.
What’s missing is a tokenization model that combines the speed, accessibility and composability of tokenization with the structure, safeguards and clarity of traditional capital markets. Fortunately, that model already exists elsewhere: depository receipts (DRs).
Read the full article here.