The Trend of Tokenization from the Historical Perspective of the Securities Market

The development of the public stock market in the United States can be traced back to the early 20th century. At that time, anyone could finance projects by selling stocks to the public, a practice that peaked in the 1920s. However, following the stock market crash of 1929 and the subsequent Great Depression, Congress passed a series of laws to regulate the public stock market, the most important of which were the Securities Act of 1933 and the Securities Exchange Act of 1934. These regulations require companies to disclose business details, publish audited financial statements, and disclose significant events when offering stocks to the public to ensure that investors are informed.

As time goes by, the importance of the private placement market is becoming increasingly prominent. In the 2020s, the best way to raise funds may be to obtain capital directly from large institutional investors without having to disclose financial reports or face retail investors. This has effectively made the private placement market a new public market. Many star tech companies have been able to raise billions of dollars at huge valuations without going public.

For these private companies, remaining unlisted has many advantages: there is no need to disclose financial reports, update business progress, and they do not have to worry about the pressure from public stock price fluctuations. However, this trend is not good for ordinary investors, as they cannot directly invest in these exciting private companies.

To solve this problem, several possible solutions have been proposed in the industry: simplifying the listing process, increasing regulatory requirements for private companies, restructuring the economy and wealth distribution, etc. However, the most radical solution is to abolish the rules for listed companies directly, allowing any company to sell stocks to the public without mandatory disclosure or auditing.

In recent years, the cryptocurrency industry has sought to circumvent securities laws by issuing "Tokens," providing a new approach for this radical scheme. Some financial institutions have begun to explore the possibility of renaming private company shares as tokens and issuing them on the blockchain. This practice may bypass existing disclosure rules and sell private company shares to the public.

A trading platform recently announced the launch of tokenization stock trading services and plans to offer tokens including those of non-listed companies. The platform's executives stated that this initiative aims to address historical investment inequality issues, allowing more people to invest in quality private enterprises.

However, we must recognize that "allowing the public to invest in private enterprises" is essentially a paradox. The core characteristic of private enterprises is that they are not open to the public and are not subject to the disclosure constraints of publicly listed companies. Therefore, "allowing the public to invest in private enterprises" is essentially equivalent to "permitting companies to sell shares to the public without disclosing information."

Although this practice has not yet fully succeeded in the United States, many major players in the financial industry are actively advocating for it. They believe that tokenization can eliminate investment barriers and allow more people to access high returns. However, this is essentially seeking a way to circumvent existing disclosure and trading rules.

History often repeats itself. Just like around 2020 when cryptocurrency projects raised funds from the public through false promises, ultimately leading to a bubble burst, we seem to be experiencing a new cycle now. The financial industry is exploring how to make the stock market more like cryptocurrency, rather than making cryptocurrency more like the regulated stock market. This trend is worth our close attention and deep contemplation.