The House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion, chaired by French Hill (AR-02), convened today for a hearing titled “Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets.”
Chairman Hill opened the session by highlighting recent legislative achievements. "Last month, the Committee made history by ushering in comprehensive digital asset market structure legislation across the House floor with strong bipartisan support," he said. He also noted the repeal of Staff Accounting Bulletin 121 to allow regulated financial institutions to custody digital assets.
Hill emphasized that while work on digital assets continues, the focus is now shifting to related topics such as tokenization of real-world assets. "Tokenizing real-world assets involves blockchains or distributed ledger technology (DLT)," he explained. He stressed that tokenization deserves its own distinct conversation and prioritization separate from digital assets.
Hill elaborated on how tokenization could modernize U.S. markets by leveraging blockchain efficiency and transparency. He pointed out existing issues in capital markets such as inflated costs, stranded liquidity, siloed markets, and high barriers to entry—issues also present in the banking system.
"With the help of blockchain, tokenization can automate some of these critical processes within a financial transaction," Hill stated. This could lead to streamlined settlements and lower costs, benefiting consumers through reduced agency costs.
He highlighted blockchain's potential for providing secure and transparent records of ownership for tokenized assets, reducing fraud risk and increasing trust in transactions. Hill acknowledged positive steps like states adopting new amendments to the Uniform Commercial Code but criticized regulatory hindrances.
"Banking institutions are now required to obtain a nonobjection from a federal regulator before conducting any pilot program touching blockchain technology," he said. Hill argued that private sector innovation should not be stifled by regulatory approvals akin to evaluating other operating system enhancements in financial institutions.
The hearing featured witnesses actively leveraging tokenization to enhance capital markets and banking systems both domestically and internationally. Hill expressed eagerness to learn about their efforts and hoped the hearing would clarify where tokenization makes sense and what regulatory adjustments are necessary.
"I am grateful for the witnesses for being here today and sharing their wealth of experience," Hill concluded.