Regulatory Clarity Can Unlock Tokenization For Small Enterprises

The clamoring for tokenization continues to increase, but enthusiasm largely centers around the opportunity for big crypto, large banks, and Wall Street.

What about small enterprises?

Small Crypto

Last week, these institutions were part of the policy dialogue during the U.S. House Financial Services Committee tokenization hearing. The Democratic witness, Plume Network General Counsel Salman Banaei, provided a compelling view of the value proposition for tokenization in his testimony.

“Plume is Ethereum’s ‘Compliance Layer’ and the only Ethereum Layer 2 blockchain built to support tokenization with AML and sanctions controls at the protocol level. Our Nest asset management protocol also embeds compliance directly into tokenized assets,” he said.

Banaei advocated for safe integration of tokenization into capital markets, and made a case for community-focused asset-backed securities.

“Congress should encourage the SEC to facilitate tokenization of asset-backed securities (ABS) involving federally-backed programs that enhance capital formation for underserved communities, i.e. securities backed by Community Development Financial Institutions, Minority Business Institutions, Minority Depository Institutions, Low-Income Housing Tax Credit programs, and Opportunity Zones.”

He also expressed concern regarding how regulatory fragmentation could impact U.S. global competitiveness in the emerging sector.

“Foreign jurisdictions are not waiting on what the SEC or Congress decides to do. The infrastructure layer for global capital markets is being built now.”

U.S. Rep Maxine Waters with Salman Banaei, General Counsel of Plume Network.

Salman Banaei, General Counsel, Plume Network

Clear Market Structure To Foster Competitiveness

A few days earlier, I was a panelist on a global tokenization session hosted by the International Law Institute. Fellow speaker Anne-Sophie Cissey, Chief Administrative Officer and Group General Counsel for Kaiko, focused on market structure. She discussed the missing infrastructure layer and the compliance challenges that can make or break cross-border tokenization.

“Crypto, with DeFi, has proven that smart contracts and blockchains work to enable financial services. Data infrastructure is an imperative layer and is necessary to bridge traditional market data pipelines and on-chain contract execution,” she stressed.

In her call to action, Cissey encouraged the formation of industry working groups, public-private partnerships, and shared standards for proof-of-reserves.

These types of recommendations can potentially unlock opportunity for small enterprises and institutions. But what is the path forward?

ILI Finance Roundtable Panel, "Tokenization – Current State of Play, Regulatory Challenges and Future Directions" (March 19, 2026)

International Law Institute

Moves Toward Harmonization

There’s much policy and regulatory work to be done to promote clarity and catalyze a robust tokenization sector with onramps for traditional small businesses and micro entities, such as Minority Depository Institutions and Community Development Financial Institutions.

While it is early days at the future frontier, in order for the U.S. to lead in the global tokenization market, Washington must act quicker. Market structure legislation in the U.S. Senate has a section on tokenization, but it’s stalled. However, guidance is trickling in and talks of harmonization across regulatory agencies is encouraging.

A few weeks ago, the Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency issued a joint statement outlining guidance regarding capital treatment of eligible tokenized securities.

Still, the U.S. needs to develop a comprehensive framework in order to ensure small players are not sidelined as tokenization booms.