While crypto has its share of critics, even they would likely acknowledge the industry’s significant innovations, including Bitcoin and stablecoin payment systems, which have profoundly impacted global commerce. Now, another crypto-driven invention is on the verge of introducing disruption on a similar scale: blockchain-based stock trading. This concept received strong endorsements from both the NYSE and NASDAQ this month, and is set to bring substantial changes for investors and companies alike.
Robinhood CEO Vlad Tenev famously described tokenized stocks as an unstoppable “freight train.” The actual arrival of this transformation will depend on how quickly regulators can establish a legal framework, but Tenev’s core premise remains sound. The more intriguing question is which firms will lead this impending wave of disruption, and which will be left behind.
According to Sebastian Pedro Bea, a former BlackRock executive who now serves as CIO at crypto firm ReserveOne, the evolving landscape of tokenized stocks is being spearheaded by both offshore players and U.S.-based “compliant disruptors.” Bea includes in this category companies such as Securitize, Superstate, and Figure. While these firms currently have limited trading volume, they are laying the essential groundwork to enable S&P 500 companies to issue their shares directly on-chain. Once this capability is in place, a wide array of corporate activities—from paying dividends to proxy votes and settling trades—will become considerably more efficient.
In a recent conversation, Bea also highlighted leading offshore players like Kraken and Ondo, which are offering a distinct type of blockchain-based stock. Specifically, these firms employ special purpose vehicles to acquire large quantities of traditional stocks, such as Apple and Tesla, and then sell tokens that provide a legal claim to the underlying shares. These offerings are essentially derivatives that do not provide all the full advantages of blockchain technology, but their tokenized wrappers enable instant trade settlement.
Currently, the market for these offerings is relatively small—perhaps totaling $2 billion across all platforms. However, this is likely to change, as key figures at the Securities and Exchange Commission are supportive of tokenized equities, and as the nation’s most prestigious stock exchanges, NYSE and NASDAQ, recently announced partnerships with OKX and Kraken, respectively. All these companies, including Bea’s “compliant disruptors,” along with Coinbase and Robinhood, are expected to be pivotal players in the coming tokenization of the stock market. In doing so, they will contribute to the creation of a more decentralized type of stock market.
Then there are those who will be on the receiving end of this disruption. This group is likely to comprise the numerous middlemen who oversee the current system of clearing and settling trades, whose roles stand to become obsolete. As Superstate notes in a helpful blog post titled “What really happens when stocks trade”: “U.S. equity markets still run on architecture designed for a different era … Settlement is delayed by design. Risk is warehoused in intermediaries built for reconciliation, not execution.”
The rise of tokenized stocks signifies that the equity markets of the future will be built around instant execution. At this point, it’s no longer a question of if, but when.
Jeff John Roberts
jeff.roberts@.com
@jeffjohnroberts