The Big Short's Michael Burry has been warning about the risks posed by the cryptocurrency industry as well as the overvalued US stock market. Recently, Burry highlighted in a Substack post that was reposted on X that we are headed towards a dystopian future where human relationships could erode under the weight of digital identity embedded into everything alongside economic sorting.
Burry highlighted that if the US Securities and Exchange Commission (SEC) allows crypto companies to list tokenised versions of US stocks, we could be soon in a dystopian future depicted by Neal Stephenson's 1992 novel Snow Crash, where corporations replace governments, people resort to virtual reality, and human relationships break apart.
'We may be headed full-on to a Snow Crash cyber-punk future with no long-term personal relationships and digital value embedded in all of us directly correlated to the value provided to a society that increasingly devalues humanity,' Burry said, adding that 'regulators have one job. Do not open scary doors.'
Last week, Bloomberg reported that the SEC is working on an innovation to develop a lighter regulatory pathway for tokenised or blockchain-based representations of public company stocks. In simple terms, it means that crypto companies could transact tokenised shares without the underlying company's direct consent or conventional regulatory oversight, facilitating non-stop trading on blockchain platforms, and subsequently driving higher market volatility.
Several experts have raised concerns about third-party issuance, settlement risks, price manipulation, and investor protection as the SEC's tokenisation plan would drive US equities closer to the dynamics of the crypto market.
Tokenised Stocks Might Not Offer the Usual Privileges
The SEC had delayed the initiative, which could be due to internal caution or external pressure. Tokenisation of stocks, bonds, and even real estate has garnered massive interest from Wall Street due to faster settlement times, fractional ownership, and enhanced worldwide access. However, Burry remains worried about less-regulated crypto infrastructure.
Elsewhere, Bloomberg reported that under the SEC's new 'innovation exemption' plan, there will be two types of tokenised stocks.
The first are stocks that companies tokenise themselves or authorize to be tokenised, while the second are stocks tokenised by third parties without the company's consent.
The first one would be stocks that the companies tokenise themselves or authorise to be tokenised, while the second one would be stocks tokenised by third parties without the company's consent.
Most importantly, investors should understand that third-party tokenised stocks might not carry all of the privileges of normal stocks, such as voting rights and dividends. However, a tokenised stock would offer you immediate proof of ownership backed by blockchain.
'The tokens may not represent actual ownership of the company, and token holders may not get all the benefits of the share,' Green Impact Exchange CEO Daniel Labovitz told a media outlet.
He had also warned that tokenised stocks could cause fragmentation. 'When the same security trades in different markets that aren't connected to each other, the price of assets can diverge, meaning that some buyers will overpay for their token,' Labovitz had explained.
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