Patrick McHenry, vice chairman at Ondo Finance and former Chairman of the House Financial Services Committee, argues that tokenized securities should not be forced into a single regulatory model. He identifies three models: market infrastructure tokenization using blockchain for recordkeeping within existing systems; customer-driven tokenization through products like notes tracking stock performance; and issuer-sponsored tokenization via direct tokenized ownership. McHenry warns that picking winners prematurely or creating walled gardens would harm innovation and investor protection. He calls for clear rules that allow different models to compete on substance, preserving the strength of U.S. capital markets. The market is already experimenting with various approaches, and regulators should avoid both misleading investors and stifling competition.

Key facts

• Three models exist: infrastructure, customer-driven, and issuer-sponsored tokenization.
• McHenry warns against picking winners or creating walled gardens.
• Clear rules should allow competition without sacrificing investor protection.
• Market participants are already experimenting with different tokenization approaches.
• Tokenization should improve transparency and portability, not replace existing systems.