Centrifuge Weighs Converting Tokens to Stock, Highlighting Gaps in Law

Centrifuge, a platform for tokenizing real-world assets with over $1.6 billion in total value locked, has introduced Centrifuge Improvement Proposal (CIP) 172 to allow native CFG token holders to convert their holdings into company equity. This strategic shift aims to mitigate regulatory overhang, reduce the costs of maintaining public token liquidity, and remove barriers to institutional participation that currently hinder growth. By transitioning toward an equity-based structure, Centrifuge seeks to create a cleaner value-accrual mechanism and facilitate easier engagement with traditional financial counterparties. This move mirrors similar efforts by the Across protocol, reflecting a broader trend among major blockchain projects struggling with the limitations of DAO governance. The proposal highlights significant frictions in the current token-based model, specifically regarding the enforceability of contracts and compliance with institutional standards. While these challenges are substantial, they appear to stem from existing legal and regulatory gaps rather than inherent flaws in tokenization technology. Emerging legislative frameworks, such as Wyoming’s DUNA and potential federal safe harbors, may eventually resolve these issues, suggesting that the current pivot to equity is a response to the present, rather than permanent, limitations of the DAO model.