Securitize Expands Regulated Business Weeks After Public Listing

Securitize is one of the largest platforms for tokenizing assets. Tokenization is the process of turning traditional financial assets, such as private credit, stocks or real estate, into digital tokens on a blockchain.

The platform supports nearly $5bn in tokenized assets across 24 products – this includes BlackRock's BUIDL fund, the largest tokenized money market fund (MMF) with more than $2.6bn in assets. 

The new registration allows Securitize Capital to provide investment advisory services under SEC oversight and is part of Securitize's effort to build a broader regulated business for institutional investors. The company now combines an SEC-registered investment adviser, broker-dealer, Alternative Trading System (ATS), transfer agent and fund administration business under one platform.

"Becoming an SEC-registered investment adviser is an important step in the continued expansion of Securitize's platform," Co-founder and Chief Executive Carlos Domingo said in a statement.

"Asset managers and institutional investors want to work with partners that understand both the opportunity of tokenization and the obligations that come with operating in regulated markets," he added.

The move subjects the company to stricter rules on compliance, recordkeeping, public disclosures and regulatory scrutiny than it faced as an exempt reporting adviser (ERA). An ERA is a type of investment adviser that is exempt from full SEC registration and many of its ongoing reporting requirements.

Post-IPO

The move comes just weeks after Securitize completed its merger with Cantor Equity Partners II and began trading on the NYSE on 2 Jul. Shares of Securitize have not fared well since opening at $12.45 per share, dropping about 44% and closing on 27 Jul down nearly 8% at $6.88.

Registering Securitize Capital with the SEC is just the company's most recent move. Since going public, the company has tokenized its own shares, making them available through its regulated platform to eligible US investors on the Avalanche and Solana blockchains. It also said it's working with the NYSE on infrastructure for tokenized securities trading.

A month before going public, the company launched Hamilton Lane's tokenized Senior Credit Opportunities Fund (HLSCOPE) on the TRON blockchain. The move made the private credit fund available on another blockchain network and widened access for eligible investors.

Unclear regulatory landscape

The broader tokenization market has grown rapidly and now holds more than $35bn in assets, according to RWA.xyz, however, despite all of the attention tokenization is getting, companies operating in the sector continue to face an evolving and unclear regulatory landscape.

Last week, SEC Commissioner Hester Peirce said some crypto vaults and onchain lending strategies could fall under the Investment Advisers Act, depending on how they are structured.

She added that moving financial services onto a blockchain does not exempt firms from existing securities laws and urged companies to assess whether their products fall within the SEC's regulatory framework.

Elsewhere, lawmakers are considering the CLARITY Act, which aims to establish clearer rules for digital assets, including whether they are overseen by the SEC or the CFTC.

Sandmark reached out to Securitize for comment, but has not yet heard back.