Kraken meets SEC to discuss tokenized trading framework

Kraken executives and legal counsel from parent company Payward Inc. met with the SEC’s Crypto Task Force. The meeting focused on how traditional assets like stocks and exchange-traded funds could become digital tokens under U.S. securities laws.

Kraken representatives said tokenization could increase trading options and allow 24-hour trading. The company argued that digital versions of traditional assets could give investors new ways to access financial products.

Kraken operates xStocks platform that offers digital versions of more than 50 U.S. stocks and ETFs. The platform launched on Solana and BNB Chain networks. Kraken later added support for the Tron blockchain.

Tokenized assets on xStocks include Apple and Tesla shares issued as TRC-20 tokens. Combined trading volume across decentralized and centralized platforms reached $2.5 billion as of August 21.

The SEC rejected a Binance proposal in 2021 for tokenized Tesla stock trading. The World Federation of Exchanges has called for stricter oversight of tokenized assets to protect investors.

Nate Geraci, President of the ETF Store, said Kraken’s meeting with the SEC shows growing institutional interest in asset tokenization. He noted that regulatory challenges remain for the sector.

The global tokenized stock market has a value of about $360 million. This represents 1.35 percent of the $26.5 billion in real-world assets that have been tokenized. The total value fell 11 percent over the past month.

Kraken’s xStocks platform allows users to trade digital representations of traditional securities. Users can buy and sell these tokens during regular market hours and after-hours trading periods.

The SEC has not announced any decisions about tokenized trading rules following the meeting. No timeline was provided for further discussions between Kraken and regulators.