From tokenization to a new landscape of the Capital Market

In the past century, the U.S. public stock market has undergone significant changes. Initially, anyone could freely issue stocks to raise funds, but this practice often came with false promises. The stock market speculation craze peaked in the 1920s, and the subsequent crash triggered the Great Depression. To restore market confidence, the U.S. Congress enacted a series of laws, primarily the Securities Act of 1933 and the Securities Exchange Act of 1934, to regulate the public stock market. These regulations require listed companies to disclose detailed business information, publish audited financial statements, and promptly disclose significant events to ensure that investors are fully informed.

However, these regulations only apply to companies that raise funds publicly, with exceptions for enterprises that do not solicit public funding. Over time, these exceptions have become increasingly important. Nowadays, large technology companies often manage to secure ample funding in the private market without needing to raise funds through public listings. Many well-known companies, such as SpaceX and OpenAI, can raise billions of dollars in the private market with valuations in the hundreds of billions of dollars, without having to go public.

This trend has had a certain impact on public investors. Ordinary retail investors find it difficult to invest in these popular private enterprises and can only purchase fragmented equity at high prices through informal channels. In recent years, a viewpoint has gradually gained popularity: modern economic growth is mainly driven by private enterprises, and the most promising companies are mostly private, yet ordinary investors cannot participate in them. This situation needs to be changed urgently.

How can this situation be changed? Some proposals have been put forward, such as simplifying the listing process and tightening regulation on private enterprises. However, the most striking proposal is a radical one: completely abolishing the existing rules for listed companies and allowing any company to freely issue stocks to the public without mandatory disclosure or auditing. Supporters believe this could bring greater market vitality and investment opportunities.

The cryptocurrency industry has provided new inspiration for this idea. By issuing "tokens" (a type of economic rights certificate similar to stocks) to raise funds, it does not have to follow traditional securities regulations. Although this practice has been controversial, it seems to be experiencing a revival in recent years.

Some fintech companies have started to experiment with the "tokenization" of private company stocks and trading them on the blockchain. They believe that this method can bypass existing information disclosure rules, allowing ordinary investors to participate in private company investments. A certain trading platform recently announced the launch of tokenized stock trading services and even gave away tokens of well-known private companies as a promotion.

This trend has sparked widespread discussion. Supporters believe that it can address the issue of investment inequality, allowing more people the opportunity to invest in high-growth companies. Opponents, however, worry that this may lead to investor rights being compromised, as private companies are not required to disclose detailed financial information.

It is worth noting that some important figures in the financial sector have also begun to support tokenization. They believe that this approach can eliminate investment barriers and provide more people with access to high return opportunities. However, this essentially means allowing companies to sell stocks to the public without fully complying with existing information disclosure rules.

Currently, this practice has not been fully realized in the United States. Investors still cannot directly purchase private company stocks' "tokens" without corresponding disclosures. However, as more and more financial professionals support this concept, the regulatory environment seems to be gradually opening up, and significant changes may occur in the future.

This trend evokes thoughts of the development history of the cryptocurrency market. Around 2020, many crypto projects attracted investments through exaggerated promotions, leading to a bubble burst and market downturn. In the face of this situation, people originally expected stricter regulations to emerge. However, reality seems to be moving in another direction: the financial industry is exploring how to make traditional stock markets more like cryptocurrency markets, rather than making cryptocurrency markets more like regulated stock markets.

How this trend of development will affect the future structure of the Capital Market is worth our close attention and in-depth consideration.