Securitize claims native blockchain tokenization is only legitimate on-chain securities model

Securitize’s argument that native blockchain tokenization is the only legitimate on-chain securities model has drawn pushback from regulators who warn the industry that blockchain technology cannot exempt tokenized assets from securities law. The debate cuts to the core of how institutional investors will ultimately acquire and hold digital representations of stocks and funds.

• Securitize acts as on-chain transfer agent for BlackRock’s $2.8 billion BUIDL fund, holding the cap table directly on Ethereum.
• Robinhood’s tokenized stock exposure launched on Arbitrum last month but denies direct ownership and bars US customers from trading.
• SEC regulators and legal experts are signaling that blockchain’s technical properties do not alter the legal status of securities or exempt them from registration requirements.

• $2.8B BlackRock’s BUIDL money market fund, held natively on-chain via Securitize.
• $150K Fine per regulator paid by Abra in 2020 for unregistered tokenized stock offerings.
• May 2026 SEC roundtable on tokenization signals regulatory engagement with the emerging market.

Securitize CEO Carlos Domingo has drawn a sharp line in the evolving market for tokenized securities, arguing that only assets issued and recorded directly on blockchain, without intermediaries or off-chain replicas, constitute authentic on-chain models. According to reporting from Cryptopolitan, Domingo contends that anything less risks confusing investors and diluting blockchain’s potential. His company operates the cap table for BlackRock’s Institutional Digital Liquidity Fund on Ethereum, a $2.8 billion money market fund that represents native tokenization at institutional scale.

The distinction matters because native tokenization eliminates counterparty risk, operational friction, and the fragmentation that arises when on-chain and off-chain records diverge. In Securitize’s model, a blockchain-based token legally represents the security itself, with no layered custody or synthetic overlay.

Robinhood and Kraken pursue synthetic models that draw regulatory scrutiny

Recent entrants have chosen a different path, tokenizing exposure to securities rather than the securities themselves. Robinhood launched its tokenized stock offering last month on Ethereum’s Arbitrum network, providing “indirect exposure” to companies like OpenAI and Tesla through tokenized contracts rather than direct ownership.

The tokens remain non-transferable off-platform, exclude US customers, and require full Know Your Customer compliance.

Kraken’s xStocks, issued by Switzerland-based Backed, take the opposite approach: they are permissionless and tradeable on decentralized exchanges. Yet US investors face the same lockout, underscoring the compliance boundaries both firms have hit.

These models sit uneasily between traditional securities and crypto-native products, satisfying neither regulatory nor institutional investment criteria fully.

SEC warns that tokenization does not exempt assets from securities law

Regulators have begun explicitly cautioning the industry that blockchain’s technical capabilities carry no legal magic. SEC Commissioner Hester Peirce released a statement this week reminding investors and issuers that tokenized assets remain subject to securities laws regardless of their technical form.

As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities.

Hester Peirce, SEC Commissioner

That warning reflects rising anxiety about the current wave of tokenization projects. Regulatory history provides cautionary precedent: Abra launched tokenized stock products in 2019 but halted the program after the SEC and CFTC opened an inquiry, ultimately paying $150,000 in penalties to each regulator for offering unregistered securities.

Lawyers such as Anthony Tu-Sekine, head of the blockchain group at Seward & Kissel, have emphasized that legal boundaries remain clear despite technological innovation. Binance and the defunct FTX both attempted tokenized stock products in recent years but abandoned them before launch due to regulatory complications.

SEC signals openness to tokenization while demanding legal clarity

Signs of regulatory flexibility have emerged. In May, the SEC convened a roundtable on tokenization that drew participants from both crypto and traditional finance sectors.

Commissioner Mark Uyeda framed the session as an effort to understand the evolving market rather than to shut it down, noting that regulators and the industry would benefit from hearing directly from investors and issuers about their experiences and needs.

That openness suggests room for compliant tokenization models to develop, provided they remain transparent about their legal character and do not obscure regulatory responsibilities. The gap between Securitize’s native approach and the synthetic models pioneered by Robinhood and Kraken will likely determine which approaches gain institutional traction and regulatory approval.

The CCS read. We see native tokenization as the institutional pathway forward, but regulators are correctly insisting that the form of an asset, whether on-chain or off, does not change its legal substance. Large asset managers will move cautiously into tokenization only after legal certainty is established, meaning Securitize’s partnership with BlackRock carries more weight than newer entrants still testing the compliance maze.

Watch for the SEC’s formal guidance on tokenized securities, expected to clarify which models satisfy securities registration requirements and which face enforcement risk. Institutional adoption will likely stall until that guidance arrives; the next inflection point will come when a major traditional fund manager, beyond BlackRock, launches a native-tokenized product on a public blockchain.