The Tokenized Stock Market Might Double Soon

The CFTC Opens FCM Customer Accounts to Tokenized Collateral

On September 24, three CFTC divisions confirmed that futures commission merchants (FCMs) and derivatives clearing organizations can invest segregated customer funds in tokenized versions of the instruments allowed by Regulation 1.25. Tokenized assets need to match the legal and economic rights of the underlying instruments and pass the rule’s liquidity, concentration, maturity, and custody tests.

It came two days after Chairman Michael Selig told the Treasury Market Conference at the New York Fed that regulators need to prepare markets for “mass tokenization,” singling out tokenized assets used as collateral as one of the most important developments.

U.S. FCM funds reached a record $442.7 billion in February, an increase of 26% YOY. While these funds have long been permitted in Treasuries and government money market funds, their tokenized counterparts are now eligible too. The entire tokenized Treasury market currently represents just 3.3% of that customer fund pool.

If FCMs allocated 2.5% of customer funds into tokenized Treasuries, the market would grow by roughly 75% or ~$11B.

FCMs are cautious with customer money, so regulatory approval doesn't mean they'll actually adopt it. Products tailored for institutional collateral, such as BlackRock’s BUIDL, Circle’s USYC, and Franklin Templeton’s BENJI, will likely benefit the most.

Tokenized Stock Holders Grew 43x in a Year

Onchain holders of tokenized stocks reached 4.01 million on September 27, up from roughly 70K a year ago, according to RWA.xyz. Robinhood leads with 1.48 million holders, followed by bStocks with 1.40 million, and xStocks with 625,680.

As tokenized stocks increase in popularity and the debate around how they should be structured continues, the newly launched Issuer Sponsored Token Coalition aims to bridge the gap by tying tokenized shares directly to an issuer’s official shareholder register. The SEC’s Innovation Exemption requires tokens to carry the exact same rights as underlying shares, which means offshore token holders can’t move to U.S. venues. To tackle this, the group is scheduled to meet with issuers at the NYSE on October 27.

Tokenized Gold Is Back Above $5 Billion

Tokenized gold reached $5.1 billion on September 27, up from $3.6 billion at the start of the year. The category is still about 15% below its March peak of $6.0 billion, but has added $601 million since June 30.

Tether Gold (XAUT) accounted for $485 million, or 81%, of the increase since June 30.

Tokenized gold is also starting to be accepted as collateral. On September 1, Arch Lending began accepting PAXG and XAUT as loan collateral at up to 75% loan-to-value, offering borrowing against tokenized gold held at qualified institutional custodians rather than a DeFi protocol. Additionally, Interactive Brokers added PAXG in July.

Tokenized assets become much more useful once they can be posted as collateral. Gold is well suited to that role given its liquidity and long history as a reserve asset.