A version of this story appeared in our The Guidance newsletter on June 3. Sign up here.

BlackRock CEO Larry Fink, investment-banking giants, and now Congress are waking up to the potential $16 trillion tokenisation industry.

The House of Representatives’ Subcommittee on Digital Assets, Financial Technology and Inclusion will convene on Wednesday to discuss the potential of tokenisation of “real-world” assets.

I’ve been talking to Wall Street and its tech providers for a decade, and I’ve never been convinced they have found applications for blockchain that work at scale outside their walled gardens.

I must admit, though, that there’s a lot of tokenisation momentum lately in influential quarters.

Just this past week, for example:

  • The US’s clearing house — the Depository Trust & Clearing Corp. — along with two European Union counterparts, published a blueprint for tokenisation standards. My story here.

  • The International Swaps and Derivatives Association published guidance on the legal treatment of tokenised collateral. Tokenisation could unlock $19 trillion in dormant collateral, as Inbar Preiss and I wrote.

  • Securities and Exchange Commissioner Hester Peirce responded to a UK tokenisation proposal, outlining her idea of a cross-border sandbox.

Now, why is Congress getting involved?

Tokenisation involves instruments that are already securities or commodities, and so one might assume we could sidestep the “are they securities or aren’t they?” debate that dogs cryptocurrencies like Bitcoin and Ethereum.

A memo released ahead of the hearing suggests there are areas of legal uncertainty, however.

The hearing could result in the SEC and the Commodity Futures Trading Commission jointly considering whether new rules are necessary to facilitate tokenisation.

Some industry insiders, though, say no new rules are needed.

I don’t think anything’s missing in the law.’

Aaron Kaplan

Prometheum co-CEO Aaron Kaplan ruffled feathers when he told Congress last year that the US securities laws were adequate to govern crypto assets.

Kaplan’s is the first company to obtain a special SEC licence that allows it to custody crypto, and it recently soft-launched custody services for Ether with unnamed clients.

“I don’t think anything’s missing in the law,” Kaplan told me ahead of the hearing.

“What’s missing is the market infrastructure that is licensed under securities laws and allows for the public trading, clearing, settlement, and custody of digital assets,” he said.

“That’s why Prometheum was created.”

Securitize has also registered for certain licences with the SEC to replicate securities market structure for tokenised assets.

I chronicled that process here.

It paid off — Securitize is now the transfer agent for BlackRock’s $456.3 million tokenised securities fund BUIDL.

Securitize’s founder and CEO Carlos Domingo, incidentally, is one of the witnesses scheduled for Wednesday’s hearing, along with the DTCC’s Nadine Chakar and outspoken crypto sceptic Hilary Allen, a professor at American University’s law school.

So it should be a good debate.

Want to debate tokenisation with me? Reach out to joanna@dlnews.com.