House committee talks tokenizing steak, eggs, securities and other real-world assets
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Anything in the real world from steak and eggs to real estate, to pharmaceuticals and stocks and bonds — can be made token and tracked on a blockchain.
Why it matters: Whether that presents a vision of a more efficient, futuristic world, or a risky proposition to marginally improve a working system, is what's up for debate.
Driving the news: A House Financial Services committee hearing Wednesday, called "Next Generation Infrastructure: How tokenization of real-world assets will facilitate efficient markets," was about just that.
The big picture: Pro-tokenization folks talk about how digital ledgers fit an increasingly digital world.
- They could, combined with smart contracts, enable supply-chain efficiencies in agriculture and health care, and lower costs for financial institutions that could enable banks to reach more Americans.
Case in point: Hearing witness Lilya Tessler, a partner with the law firm Sidley Austin, said in response to a question about how tokenization might work for steak and eggs:
- "The location and authenticity of any produce, so an egg, in your example, can be reported on a blockchain. And then the movement of that produce can be tracked using the blockchain across the supply chain."
Separately, Robert Morgan, who heads USDF Consortium, an association of insured banks seeking to drive adoption of tokenization, said it could reduce banking frictions, and "provide real-time transparency."
- Customers could have "real-time insight into how quickly the funds will move, what it will cost them and when it's received" regardless of what time or day it is, he said.
- Nadine Chakar, who heads digital assets for clearing and settlement services provider DTCC, spoke of speedier settlement cycles on private blockchains.
The other side: American University law professor Hilary Allen said she used to say things like "underlying blockchain technology could be revolutionary," but she doesn't anymore.
- "Once I actually started to learn about the technology from independent technologists, it became clear how limited and problematic it really is," she said.
Friction point: Lawmakers used part of Wednesday's hearing to discuss some recent crypto-related measures on the Hill, and how'd they'd impact tokenization and subsequent regulation.
- In response to a question from Rep. Brad Sherman (D-Calif.), Allen said that FIT21 — the broad market bill recently passed by the House — would basically allow you to slap a blockchain on any kind of investment contract" and become "magically exempted from the securities laws."
Crypto-friendly Rep. Wiley Nickel (D-NC) used some of his time to call on the SEC to withdraw crypto custodial rule SAB 121, which he said is "holding back tokenization technology."
- Congress recently voted to repeal the rule, but Biden preserved it with a veto.
- "If [SEC chair Gary Gensler] is putting President Biden in a very difficult position on this issue, we have a tremendous executive order and continuous statements from the administration wanting to work with Congress in a bipartisan manner," Nickel said.
