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FRM Part II · FRM Exam Part II · Tokenization and Financial Market Inefficiencies

Regulators emphasizing the principle of 'same activity, same risk, same regulation' toward tokenized securities are primarily seeking to:

The principle aims to prevent regulatory arbitrage by applying equivalent rules to activities with the same economic function and risk, regardless of whether technology such as tokenization is used. It implies technology neutrality, not exemption, a single mandated blockchain, or a prohibition.

  1. APrevent regulatory arbitrage by applying equivalent rules regardless of the technology usedCorrect
  2. BExempt tokenized assets from existing securities law
  3. CRequire all tokenized assets to settle on one public blockchain
  4. DBan tokenization of regulated instruments

Explanation

The principle is technology-neutral: if a tokenized instrument performs the same economic function and carries the same risk as a traditional one, it should face equivalent regulation, limiting arbitrage. It does not imply exemption, a single platform mandate, or a ban.

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