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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• Ben unpacks some of the latest updates in the world of tokenization as the sector continues attracting more traditional players. 

• Casey shares updates from Washington on where we stand with crypto legislation headed into the election. 

• Speaking of the election, we look at how grassroots movement “Crypto4Harris” is ramping up its efforts.

Tokenization efforts not slowing down 

Are you sick of reading about tokenization yet?

We wouldn’t blame you, as we’ve heard about the segment’s potential for a while now. 

But the exploration of this sector by financial majors seems to be living up to the hype, at least in terms of the volume of initiatives. As big companies continue to figure out the best way into the space, many industry watchers expect the trials and tribulations to ultimately bear massive fruit. 

Tokenization has been a hot topic in recent years. Franklin Templeton launched its OnChain US Government Money Fund in 2021 and started allowing institutional investors to transfer shares of the fund to other shareholders earlier this year.

Asset management behemoth BlackRock also joined the space, introducing its own tokenized money market fund in March.

A recent report by Kraken subsidiary CF Benchmarks noted that while tokenized money market funds eliminate intermediaries and boost accessibility via asset fractionalization, these benefits are only scratching the surface. 

Investors across a broad range of financial instruments will be given better liquidity, transparency and efficiency thanks to tokenization, analysts Gabe Selby and Mark Pilipczuk wrote.

“Tokenized assets can integrate with DeFi, enabling stocks, bonds and real estate to be used as collateral or traded on decentralized exchanges,” they added. 

Selby and Pilipczuk project tokenized assets to breach the $20 billion mark over the next 12 months. Here’s where they note that space stands now:

WisdomTree — a fund group that manages $110 billion in assets — debuted its “direct-to-business counterpart” to the “blockchain-enabled” consumer app it launched last year. 

Designed to unlock tokenized real-world asset access to more users, the new platform hopes to ultimately enable them to interact with any WisdomTree-issued token across wallets and blockchains.

There’s also crypto-focused Amina Bank, which said last week it’ll be exploring how tokenization can enhance wholesale cross-border payments. It will be facilitated by Project Agorá, launched earlier this year by the Bank for International Settlements and the Institute of International Finance.

Another development: After offering tokenized physical gold to institutional investors last year, banking giant HSBC tested “quantum-secure technology” for buying and selling such assets.

Finally, there were SkyBridge Capital founder Anthony Scaramucci’s comments at Solana Breakpoint, as he explained “why we want to tokenize everything.” 

Spoiler: The cost of various transaction verification systems worldwide, which he pegged at $7 trillion, is one of the biggest reasons.

“Just imagine if we can start tokenizing things and take third parties out of the equation, use the distributed network to trust each other, take that $7 trillion and put it back into the economy,” he posed to the crowd.

Plenty are indeed imagining, and plenty are working toward such a world. But there will also be plenty of waiting as we see which specific blockchain tech use cases win out.

— Ben Strack

The number of SEC commissioners who said “yes” when asked whether or not the US should “encourage innovating technologies like digital assets.” The question came from Rep. Wiley Nickel, D-N.Y., during yesterday’s SEC oversight hearing in the House Financial Services Committee. 

The sole witness who did not give a simple “yes” was SEC Chair Gary Gensler, who responded with the following: “Protecting investors, I agree with that for sure. Promoting innovation? Yes, but protecting investors for sure.” When pressed to give a “yes” or “no” answer, Gensler again reiterated that protecting investors is his biggest priority.

Are ETFs the positive catalyst digital assets need? Or do they erode the core values of permissionless DeFi? 

We’re taking the Bianco vs Bloomberg ETF debate from X (formerly known as Twitter) to the mainstage at Permissionless.

I found myself trekking to Midtown Manhattan not once, but twice this week. Given the ongoing UN General Assembly meeting, this was no small feat. 

I braved the nightmarish commute first for a Crypto4Harris event on Tuesday evening (more on that later) and then for the Solidus Labs DACOM event Wednesday. 

The Solidus event was headlined by government speakers: Rep. Tom Emmer, D-Minn., CFTC Commissioners Caroline Pham and Summer Mersinger, and NY State Department of Financial Services Superintendent Adrienne Harris. 

Emmer, who appeared virtually in a pre-recorded address (unfortunate, but as organizers said, it’s crunchtime to pass a funding bill before the end of the Congressional session), said he’s reassured by recent progress in Congress. 

He pointed to the passage of FIT21 in the House last spring, and bipartisan support for efforts to block the SEC’s SAB 121 guidance. Still, Emmer said, with the election looming, it will be difficult to pass meaningful legislation until the dust settles after November. 

Cody Carbone, president of the Chamber of Digital Commerce, said there’s a strong chance we see a divided Congress in 2025, with the Senate potentially flipping Republican and the House going to the Democrats. 

But this may not be the nail in crypto legislation’s coffin. In fact, a divided Hill may be just the push lawmakers need to get something through. 

“Hopefully digital assets is one of those nonpartisan issues that [members of Congress] can look to very early, where there's already been so much bipartisan progress,” Carbone said. “This is an issue now that both parties are starting to rally behind, and you're looking for any opportunity to show — when you're early in leadership — that you can pass something bipartisan.”

— Casey Wagner

Crypto industry leaders, lawmakers, legal experts and one journalist (about 30 or so of us in total) gathered Tuesday evening in New York for a Crypto4Harris fundraiser. 

(A quick note: I attended this event as a member of the press; I did not and have not donated to Harris or any other political campaign.)

The grassroots movement — spearheaded by industry leaders including Amanda Wick, principal at Incite Consulting, and Jason Gottlieb, partner at Morrison Cohen — is focused on rallying the crypto industry against Donald Trump, who, to date, has been far more vocal about crypto policy. 

“You want to hear something akin to what Trump says, I can’t offer you that,” Rep. Dan Goldman, D-N.Y., said at the event, where he spoke virtually. 

Trump will say whatever he needs to in order to win, argued Goldman (who served as lead counsel on Trump's first impeachment). But ultimately, he will always “reverse course.” 

Harris’s comments on crypto may be limited, Goldman went on to say, but they are “legitimate in that they are not over the top.” 

The comments come as Harris was recently downgraded from a “B” to “NA” on nonprofit Stand With Crypto’s political ranking. 

Harris had initially been upgraded to “B” after her comments at a New York City fundraiser over the weekend, where she told the crowd she’d “encourage innovative technologies like AI and digital assets while protecting consumers and investors,” according to Bloomberg’s Jennifer Epstein.

— Casey Wagner

• Apparently 92% of the crypto-related enforcement actions from the SEC under Chair Gensler have involved alleged registration violations, according to Brendan Malone, policy manager at Paradigm. This compares to around 87% of crypto actions brought under former SEC leaders involving such allegations.

• The Bank of New York Mellon is moving forward with providing custody services for bitcoin and ether held by ETF clients without listing the custodied assets as a liability on the bank’s balance sheet, Bloomberg reported Tuesday. The development appears to be an exception to the SEC’s SAB 121 guidance issued in 2022. 

• The IRS will finalize tax reporting requirements for digital asset brokers by the end of this year, the US Treasury Office of Tax Policy said Tuesday during the American Bar Association Virtual Fall Tax Meeting.