Lilya Tessler, partner and leader of Sidley’s FinTech and Blockchain practice, gave testimony on June 5 before the U.S. House Financial Services Committee’s Subcommittee on Digital Assets, Financial Technology and Inclusion. The hearing was titled “Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets.” A link to Lilya’s written testimony can be found here; a recording of the hearing and to Lilya’s written testimony can be found on the House Financial Services Committee’s website here.
According to the subcommittee memo describing the hearing rationale, “Over the past several years, crypto-assets associated with newer blockchain networks have dominated the conversation surrounding blockchain technology. However, traditional financial institutions are exploring the benefits blockchain technology bring to existing markets, beyond crypto-assets. . . . Depending on the nature of a specific asset, however, existing laws or regulations may create uncertainty regarding a person’s interest or property rights associated with a tokenized asset. Some regulators and commentators emphasize the need to regulate assets according to their specific risk characteristics and not necessarily their underlying technology.”
In her testimony, Lilya discussed how tokenization can be applied to any asset, such as securities, bank deposits, gold, food, pharmaceuticals, or real estate. Tokenization does not change the essential nature of an asset. A security represents the same bundle of rights, whether it is represented by a paper certificate, an entry on a centralized database, or a token on a decentralized blockchain ledger. Tokenized real-world assets are already subject to existing laws and regulations, but the regulations and regulators need to provide enough flexibility to fully realize the capabilities of this new technology.
Other witnesses testifying at the hearing included representatives from industry and academia with insight concerning adoption and utilization of blockchain, including Carlos Domingo, co-founder and CEO, Securitize; Nadine Chakar, global head of DTCC Digital Assets, Depository Trust and Clearing Corporation; Robert Morgan, CEO, USDF Consortium; and Prof. Hilary Allen, Professor of Law, American University Washington College of Law.
Legislative proposals under consideration by the committee include creation of materials for Congress, including a study to be conducted by the Commodity Futures Trading Commission and the Securities and Exchange Commission to assess whether additional guidance or rules are necessary to facilitate the development of tokenized securities and derivatives products, and for other purposes; and H.R. 8464, the Tokenization Report Act of 2024, which would require the Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and the National Credit Union Administration to jointly submit a report on trends in the use of blockchain technology to tokenize traditional assets.
Lilya, a partner in Sidley’s Securities Enforcement and Regulatory group, leads Sidley’s FinTech and Blockchain practice, where she represents digital asset trading platforms, blockchain technology companies, U.S. and non-U.S. broker-dealers, financial services firms, and cryptocurrency funds. She has been ranked by the Chambers FinTech Guide for FinTech Legal: Blockchain & Cryptocurrencies – USA – Nationwide since 2020, recognized in Band 1 since 2022 and in Crypto-Asset Disputes in 2024. Lilya also was named a “Fintech MVP” (2022) and Fintech “Rising Star” (2019) by Law360.
Sidley’s FinTech and Blockchain group is recognized as a Band 1 practice in the 2024 Chambers FinTech Guide and was named “FinTech Practice Group of the Year” by Law360 (2020). This diverse group includes lawyers focused on securities, funds and banking regulation, payments, capital markets, private equity, insolvency, M&A, and technology who work across disciplines to provide tailored solutions to address clients’ varied business interests.
