Could Tesla Tokenize?

August 27, 2018, 8:18 PM UTC

Late Friday night, Elon Musk announced that Tesla would stay public, less than three weeks after the CEO initially tweeted that he was considering taking the electric-car company private.

There were many reasons Musk cited for why Tesla was “better off as a public company,” but one of them particularly struck me: “There is also no proven path for most retail investors to own shares if we were private,” Musk wrote in his official statement.

No proven path. Of course, he’s right. U.S. financial regulators restrict ownership of shares in startups and other private companies to so-called “accredited investors”—those considered wealthy enough to be able to afford the additional risks that come with owning stock that doesn’t trade on mainstream markets, making it illiquid.

But there is one risky investment that retail investors can own no matter how rich (or not) they are: cryptocurrency, obviously. The U.S. Securities and Exchange Commission doesn’t prohibit individuals from buying Bitcoin and other digital assets directly—largely because it can’t, due to the decentralized structure of the blockchains on which those cryptocurrencies run. On the other hand, the SEC has prevented cryptocurrency from becoming even more widely available—such as it did this week by rejecting the rest of the pending applications for Bitcoin exchange-trade funds, or ETFs.

Cryptocurrency, however, is far from “proven” when it comes to offering a responsible way for people to invest and diversify. Just check out this week’s “rekt” section for various tales of individuals who lost their savings in cryptocurrency.

Still, I can’t help thinking that crypto could one day help provide the path that Musk is looking for. It’s an idea that came up a couple of weeks ago on our show Balancing the Ledger, when Andra Capital’s Haydar Haba suggested creating a “Tesla Coin” to solve Musk’s problems.

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There’s still a major obstacle in the way, though: Haba and other entrepreneurs offering “security tokens” currently also restrict them to accredited investors in order to stay on the right side of the SEC.

Slava Rubin, co-founder and CEO of Indiegogo, described on the latest episode of the show how his company only sells its security tokens, usually backed by real estate, to those who prove their accredited status through a verification process. But he also alluded to the way tokenization could open up “a whole other asset class to more people” the same way Bitcoin does for investors around the world.

Unlike Bitcoin, though, such security tokens are backed by tangible assets with established real-world value, making them potentially safer for retail investors, Rubin added. “With one of these security token offerings, you have a clear building that has customers, that has employees, that has been around for years,” he said.

Maybe someday the SEC will allow everyone to own tokenized stock of companies—whether they’re public or private.

A version of this article originally appeared in the The Ledger, Fortune’s weekly newsletter on the intersection of finance and tech. Subscribe here.