Digital asset treasury (DAT) companies tokenizing their stock on blockchain increases risks to investors and their businesses, according to multiple crypto industry executives.
“Blockchains trade 24/7, whereas traditional markets have specific business hours,” Kadan Stadelman, chief technology officer of the Komodo decentralized exchange platform, told Cointelegraph.
Rapid on-chain price movements that occur outside of traditional market business hours can cause a bank run on the stocks of financial companies that issue both tokenized and traditional stocks without sufficient time to react to the sharp drop in price.
The value of tokenized shares exceeded $1.3 billion. sauce: RWA.XYZ
The risk of smart contracts from misuse of the code and the risk of hacking both the underlying assets and tokenized stocks held by crypto treasury companies further amplifies the risks, Stadelman added. Kanny Lee, CEO of decentralized exchange SecondSwap, said:
“Tokenizing DAT stock creates a synthetic asset on top of a synthetic asset. Investors end up being exposed twice to the volatility of Treasury cryptocurrencies and once to the complexities of corporate equity, governance, and securities laws. This adds tremendous risk to an already volatile asset.”
Tokenized stocks are growing in popularity as dozens of companies tokenize their stocks, and the U.S. Securities and Exchange Commission (SEC) is taunting capital markets 24/7. However, due to a lack of legal clarity, tokenized stocks remain in a regulatory gray area.
Related: SEC’s push for tokenized stocks has unclear benefits for cryptocurrencies: Dragonfly Exec
SEC and stock exchanges promote stock tokenization and 24-hour trading
The US SEC is considering blockchain-based stock trading to modernize traditional trading systems, which are closed at night, on weekends, and on holidays, while featuring longer settlement times compared to digital asset technologies.
SEC officials are considering a plan to allow regulated retail cryptocurrency exchanges to offer tokenized stock trading to customers in the United States.
Nasdaq President Tal Cohen announces the promotion of 24-hour stock trading. sauce: Tal Cohen
Traditional stock exchanges such as the tech-heavy Nasdaq and the New York Stock Exchange (NYSE) are also pushing for expanded trading hours to catch up with the 24-hour crypto market.
Nasdaq announced plans in March to offer 24-hour trading, five days a week, and aims to roll out expanded trading hours in the second half of 2026.
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