BitGo says asset servicing is the real barrier to tokenized securities

Investing.com -- Custody of the tokens themselves is largely a solved problem, but the real barrier to moving tokenized securities at institutional scale is everything attached to them, including the rights, obligations and servicing that must survive when an asset changes hands, a senior BitGo executive told Investing.com this week.

Eugene Hahr, vice president of product at the digital asset custody firm, said institutional readiness had shifted from storage to asset servicing as venues including the London Stock Exchange advance tokenized equities and U.S. regulators open the door to onchain trading.

"Holding the token was solved some time ago," Hahr said. "What is not uniformly solved is everything attached to the token: what claim it represents, who is obligated on that claim, and whether the claim keeps working when the asset moves."

He pointed to the U.S. Securities and Exchange Commission's Sept. 17 order, which he said gives certain onchain venues a conditional, time-limited exemption from exchange registration provided the token carries the same rights as the underlying share, excluding synthetic exposure.

The real work, he explained, lies in whether a dividend or proxy can reach a wallet holder, whether an onchain position can be reconciled against the underlying every day, and whose balance sheet the asset sits on if an intermediary fails.

On the transatlantic race, Hahr said the two sides had started from opposite ends, with the U.K. beginning with infrastructure through its Digital Securities Sandbox, which tests issuance, trading, settlement and servicing under Bank of England and Financial Conduct Authority supervision, while the U.S. "has come at it from the trading end," leaving post-trade on existing rails.

"I would not call either one ahead," he said. "Both meet the same question eventually, which is what you settle in overnight and how good that claim is when something fails."

Much of the equity activity today remains a "wrapper," a token representing a claim on a share that is otherwise issued, traded and settled conventionally, Hahr said, while tokenized money market funds, treasuries and private credit are already in production.

When it comes to BitGo’s clients, Hahr noted that the conversations “have become much more practical.”

“Banks and asset managers are looking at how they can custody crypto assets, stablecoins and tokenized securities without having to build a different operating model for each one,” he stated.

“They are also asking much more detailed questions around where an asset can be held, who can transfer it, what compliance controls apply and how it settles. Institutions are interested in tokenization, but they want it to fit within the same risk, compliance and operational standards they already use elsewhere.”

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