Tokenization has become one of the biggest promises of cryptocurrencies. The idea sounds simple. Take stocks, bonds, or funds and move them to blockchain rails that run 24 hours a day.
Supporters say the results could reshape financial markets. Trading may occur 24/7.
Payments can occur almost instantly instead of taking days. Investors can move collateral between markets more quickly, and companies can reduce back-office costs associated with legacy systems built decades ago.
When tokenized securities are traded around the clock, investors have more flexibility to lend or pledge their shares as collateral, and issuers are provided with better data about who owns and transacts their shares. This visibility could increase demand for the stock and make it cheaper for companies to raise money on the public markets.
However, turning traditional securities into blockchain-based assets has proven much more difficult than simply creating digital tokens that reflect stocks. This distinction is becoming increasingly important across Wall Street.
Last week, CoinDesk owner BLSH added another layer to that trend by announcing a $4.2 billion deal to acquire transfer agency Equinity. The acquisition targets one of the least visible but most important parts of financial plumbing: shareholder recordkeeping.
The stock transfer agent maintains official ownership records for public companies. They track stock ownership, handle stock issues, handle dividend payments, and manage corporate activities such as stock splits.
Bullish CEO Tom Farley argued during Thursday’s earnings call that much of today’s tokenized stock market is primarily comprised of “wrappers” or IOUs, rather than actual blockchain-native securities.
In many current models, tokenized stocks are synthetic instruments that mirror traditional stocks held elsewhere. While investors can gain exposure to stock prices, the tokens themselves are not necessarily legally recognized shares recorded on the company’s books.
Farley said owning the transfer agent tier could potentially issue tokenized shares directly to shareholder records from the outset. This is a major structural difference because it allows shareholders and management of public companies to learn more about each other.
Farley said on the conference call that issuers can gain insight into how often their stock is actually trading, who may be trading it and how many investors are holding it for the long term.
“When you go talk to (investor relations) and (chief financial officers) of public companies, and I’ve done that for most of my career, the number one thing they’ll tell you, frankly, is that they’re in the dark and there’s very little information available to them because of the nested infrastructure that has been built in this country for over 200 years,” he said. “We live as a public company, and it’s almost comical how little information we have about our own shareholders. So tokenization, the promise of more information, is very compelling.”
From an investor’s perspective, tokenized stocks offer greater opportunities to trade on weekends and during times when traditional U.S. markets are closed, he said, citing Asian investors who may want to trade U.S. securities as an example.
Accounting for tokenized stocks
But established financial giants, cryptocurrency companies, and index providers are now grappling with other fundamental questions, such as what would happen if tokenized stocks started mingling directly with traditional stock markets.
For FTSE Russell, the issue is no longer theoretical. Kristin Mierzwa, the company’s head of digital assets, said tokenized stocks are already forcing the market to debate how liquidity, market capitalization and index inclusion are calculated.
“We see companies like Galaxy issuing shares that are tokens, but how do you factor in the shares in the overall market capitalization?” Myeshwa said in an interview with CoinDesk. “Are those stocks going to be fully free-floating?”
This question cuts to the core of how modern stock indexes work.
Indices such as the Russell 3000 rank companies in part by float-adjusted market capitalization, which measures the value of publicly traded stocks. If a company starts issuing some shares through a traditional exchange and other shares exist as blockchain-based tokens, index providers will need to decide whether those tokenized shares should be included in the official calculation.
The answer is not obvious. Currently, many traditional asset managers still cannot directly manage tokenized securities. Pension funds, mutual funds, and large institutional investors often rely on authorized custodians and regulated market infrastructures that are not designed for blockchain-native assets.
Mjezwa said some on FTSE Russell’s advisory board are currently looking at tokenized stocks cautiously for that reason. “If these stocks aren’t currently in the custody of the big asset managers, they probably don’t want us to factor them into our calculations,” she said.
That stance may not last long. Large custodians and banks have accelerated blockchain projects over the past two years as tokenization moves from cryptocurrency experimentation to broader infrastructure competition.
“I think we will move to a stage where all custodians manage tokens,” Myeshwa said.
This debate has further intensified following a series of recent tokenization announcements from both crypto and traditional financial companies.
BlackRock, Franklin Templeton, and Apollo are all expanding their tokenized fund products. Robinhood (HOOD) and Kraken have been considering tokenized stocks. Coinbase-backed projects continue to push stablecoins and blockchain payments deeper into capital markets.
Mark Wendland, CEO of Canton Network’s parent company Digital Asset Holdings, described the disparity as the difference between “true native issuance” and similar issuances that have been tokenized.
“A security is a security,” Wendland said in an interview with CoinDesk, referring to recent statements from U.S. securities regulators that tokenized securities should be treated like traditional securities under capital regulations.
This distinction is important because blockchain payments change the way ownership passes through the marketplace.
Today, most stock trading still relies on multiple layers of intermediaries and delayed settlement systems. Even after a transaction is completed, it may take one to two days for securities and collateral to be transferred between parties. Tokenized securities have the potential to compress much of that process into near real-time.
“Much faster”
Wendland said the biggest opportunity may not be 24/7 trading. Instead, he pointed to collateral liquidity and capital efficiency.
In traditional finance, large trading companies constantly move collateral between brokers, clearinghouses, and counterparties. Settlement delays tie up capital, which cannot be reused elsewhere.
“If collateral normally moves on a T+1 or T+2 basis and now moves more in real time, the throughput of that collateral movement is much faster,” Wendland said.
This means that companies may be able to deploy the same capital more efficiently across markets.
Imagine that a trading company posts Treasury bills as collateral in the morning. Under the current system, collecting excess collateral can take several days. On blockchain rails, these assets could theoretically be returned within hours or minutes.
Proponents believe these efficiency gains could ultimately save companies billions of dollars across the stock, repo, and derivatives markets.
price discovery
Still, tokenization raises entirely new market structure issues. One issue concerns pricing.
Traditional stock markets close at night and on weekends. Tokenized assets do not necessarily stop trading. Myeshwa gave a hypothetical example of Apple stock trading on the blockchain market over the weekend. If a tokenized Apple stock trades at a certain price on Saturday, but the Nasdaq opens significantly lower on Monday morning, companies need to determine where the true price discovery occurred.
“Really, you shouldn’t see discounts that deep,” she said. “But it will be interesting to see where the price discovery comes from.”
The problem becomes even more complex when multiple tokenized versions of the same stock exist at the same time.
Some tokens may include dividend rights. Some people may not. One version may be settled through a regulated custodian, while another may be freely traded on a decentralized infrastructure. This could effectively create multiple blockchain-based shared classes associated with the same company. “Pricing and liquidity can be different,” Myeszwa said.
Index providers may ultimately require a methodology similar to traditional Class A or Class B stocks that combines liquidity between different tokenized versions of the same security.
Timing can also be a source of operational headaches.
Many financial benchmarks rely on synchronized market data across currencies, stocks, and derivatives. However, tokenized markets that operate continuously may not neatly align with traditional market times.
For example, the foreign exchange hedging market is still mostly closed on weekends. If tokenized stocks trade non-stop while currency hedging is paused, index providers may need an interpolation model to calculate benchmark values during those gaps.
Stablecoins also pose related challenges.
Many stablecoin issuers back their reserves with the US Treasury. However, the government bond market does not operate continuously. If stablecoin holders demand large redemptions over the weekend, issuers could face a liquidity mismatch between always-on crypto markets and traditional financial rails.
These concerns are part of the reason why banks are increasingly building private blockchain systems rather than connecting directly to open decentralized financial networks.
Myeshwa said many large financial institutions have effectively created a “walled garden” where tokenized assets can be moved within a tightly controlled environment that maintains compliance, identity and security standards.
While this approach may frustrate some of the crypto counterculture, it mirrors how traditional finance is adopting new infrastructure. Banks recognize the efficiency gains that blockchain payments can bring, but still seek oversight, insurance protection, and regulated counterparties. At the same time, crypto-native companies continue to drive innovation at a faster rate than many traditional institutions expected.
“I don’t think it will take 10 years,” Myeszwa said. “In the next two to three years, we’ll start to see much more interoperability.”
