Tokenized Equities Need An Adr Structure to Protect Investors

Today, Two Dominant Approaches Exist:

The Wraper Model Involves tokenized Ious that Provide Synthetic Exposure to Exist Equities Rater Than Direct Ownership. These tokens do not grant Holders Any Governance Rights or Enforceable Claims to the Underlying Shares. Transferability is typically restricted to CLOSED ECOSYSTEMS, LIQUidity is Siloed Across Issuer-Controlled Platforms and Regulation Can Be Murky, With Many Produces Not Avail.

The On -chain Issuance Model Means Creating A Native Digital Share Class Issued Via Blockchain. While this Approach Aligns More Closely with the Legal Definition of Security, IT Introduces Operatorial Complexities and Scalacy Challenges. Active Issuer Participation Is Mandatory, Liquidity Remains Fragmented Between the on -chain Tokens and Traditional Securities and Broker-Dealer Standards Inconsistent, Complication Particating Partic. and investors.

What’s Missing is a tokenization Model that Combines the Speed, Accessivity and Composivity of Tokenization with The Structure, Safeguards and Clarity of Traditional Capital Markets. Fortunately, that model already exists elsewhere: Depository Receipts (DRS).

In Many Ways, DRS Were the Original Form of Tokenization. For over a Century, American Depository Receipts (ADRS) have enabled Foreign Equities to Trade in the Us Through a Regulated, Custody-Backed Structure. Today, this Framework Can Also Bridge Traditional Securities with Tokenized Infrastructure, Offering A Scalable and Leglyly Sound Foundation for Modern Equities.

The CASE FOR TOCENIZED DRS

By Combining Blockchain Rails with the Legal and Operational Framework of DRS, Market Participants Cans Unlock Broader Participation and Real-Time Asset Service Without Compromising on Invator.

Other Benefits Include:

• Preservation of Shareholder Rights

Unlike Synthetic Wrappers, The Adr Structure Perfects Shareholder Rights, Enabling Them To Be Passed Along to Token Holders. This includes Economic Entities, Such As Dividends and Other Corporate Actions, As Well As Governance Rights Such as Voting.

• Clear Segregation of Duties

A regulated Custodian Bank Safkeeps The Underlying Shares in a Segregated, Bankring-Remote Structure, Held Solely for The Benefit of Adr Holders. An Independent, Market-Neutral Depositary Facilitates Dr Issuances and Cancellies, Maintains Accurate Records Using An Sec-Registered Transfer Agent and Performs Daily Recorms. The Depositary Has No Ownership Claim on the underlying Shares of Themselves.

• Regulatory Precedent

Adrs Are Recognized As Securities Under USA LAW. For years, they have been used to allow US Investors to Own and Trade Foreign Shares in the US Markets. Furthermore, The Receipt Structure Has Been Flexible to Enable Fractionalization of US Preferred Shares. With Regards to Tokenized Securities, Commissioner Hester Peirce in Her Latest Statement on Tokenization Mentioned that “A Token Could Be A Receipt for A Security.”

• Full Funginess and Market Access

Adrs are fully fungible and redemable for their underlying Shares, Enabling Same-Day, Non-Taxable Conversions. They be Made Available To Both Retail and Institutional Market Participants Who Can Chan Chan to Hold Securities in Tokonized OR Traditional Form Without Sacrificing Rights or Liquing. The Fungibality of Adrs is Supported by Analysis from Msci, WHICH INDICATES THAT, ON AVERAGE, Adrs Trade at Parity with Their Underlying Local Shares.

• Scalability

Adrs Can Be Deployed by Both Stock Issuers and Secondary Market Participants, Enhance Scalacy and Adoptation-Unlike On -chain Issuance Models Reliant on Issuer Initiation and Acade.

A trusted mechanism for bridging markets

Proven and Fully Integrated Into Global Finance, Apply The Adr Structure to Tokenized Equities Is A Logic Evolution.

As tokenization matures, this kind of innovation is cryitical to scaling adoption and trust. Just As Sec Rule 12G3-2 (B) StreamLined Access to Foreign Issuers, A Similar Regulatory Mechanism Could Unlock Broader Tokenized Equity Markets, Enabling Public Totes Companies Investors in a compliant Manner.

The Path Forward Doesn’s Require Inventing A New Wraper – It Requires Adapting A Proven One. In Other Words, The Bridge Between Traditional Finance and Digital Infrastructure Already Exists. It Just Needs to be Thoughtfulfully Crossed.