Key Takeaways:
- Tiger Research warns that tokenized stocks may lead to the fragmentation of liquidity and revenue fragmentation on the traditional exchanges.
- The SEC is in the process of developing an “innovation exemption” regime which could grant a third-party the ability to tokenize a listed share without the approval of its issuer.
- Rising demand for on-chain real-world assets (RWAs) including $2.6 billion worth of open interest on Hyperliquid, has already moved capital away from traditional market infrastructure.
Discussions about tokenizing stocks continue to gain momentum as U.S. regulators inch closer to granting entry into the world of publicly listed equities through a blockchain.
The shift is seen by some as accelerating settlement and facilitating a wider range of market opportunity, but the new research takes issue over this, suggesting the shift may have transformative implications for the way global financial markets run.
Read More: SEC Eyes Tokenized Stocks Plan That Could Unlock Trillions in Crypto Trading Markets
SEC Framework Could Accelerate Tokenized Equity Markets
The U.S. Securities and Exchange Commission is making plans to settle for an “innovation exemption” structure that would permit third-party platforms to launch their very own tokenized variations of Apple, Tesla or other shares without having to ask for approval from the actual companies.
The blueprint comes after months of lobbying by the industry and more comprehensive blockchain architecture efforts by policy makers and the crypto-friendly community to incorporate the technology into capital markets.
But just recently, Commissioner Hester Peirce of the SEC indicated that the exemption could have a slightly more limited scope than what some market participants might have anticipated.
The framework would supposedly be used for tokens representing traditional shares with voting rights and dividend payments but not for synthetic stock tokens that would simply represent price movements.
Liquidity Could Be Pulled Away From Traditional Exchanges
Tiger Research director Ryan Yoon argues that the biggest threat is not technological disruption but structural market fragmentation.
Most trading of major securities is today dominated by “centralized exchanges” like the NYSE and Nasdaq. But that can be changed by tokenization, which enables other platforms and blockchain networks to represent the same stock at the same time.
Read More: DTCC Targets $114T Tokenization Push With 50+ Firms, Eyes October 2026 Launch
Revenue Battles Are Becoming Just as Important
The same trend might continue if tokenized equities become commonplace before the more strongly entrenched exchanges offer on-chain comparable alternatives.
Meanwhile, there has been an increasing interest in decentralized platforms. Hyperliquid’s real-world asset market recently reached a record $2.6 billion in open interest, reflecting increasing demand for 24/7 blockchain-based exposure to traditional assets.
The trend puts the regulators and exchanges in a difficult spot. So far established institutions can either welcome tokenization through partnerships and under-developing its infrastructure or could try to slow down its penetration by tightening its rules. Competing for market dominance, fees, and trading volume online is becoming like it never has before as more capital moves on-chain.
