The idea of Wall Street’s “closing bell” could soon become a thing of the past.
As blockchain technology shifts deeper into global finance, tokenized stocks — basically digital representations of traditional stocks — are moving from the crypto space to major financial institutions, The Wall Street Journal (WSJ) reported Thursday (April 2).
That report notes that while U.S. regulators — at least from now — bar retail investors from owning these assets, interest is rising at the institutional level.
Robinhood and Kraken offer tokenized trading to foreign customers, while the New York Stock Exchange and Nasdaq are both working on tokenization platforms.
These moves are mirrored by the Depository Trust & Clearing Corp. (DTCC), which plans to tokenize U.S. Treasuries later this year as part of a larger ambition to eventually tokenize its entire $100 trillion asset catalog.
“This is no longer driven by FOMO,” said Nadine Chakar, global head of digital assets at DTCC. “It’s truly driven by real business cases, client demands.”
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“We are keeping an eye toward the future, where our ambition is to tokenize all $100 trillion in assets that we have. That is the ultimate goal that we’re striving for,” she added.
Still, the WSJ report said, this transition isn’t without friction. The sector is still a niche market, valued at approximately $900 million compared to the trillions in global equities
Most tokenized stocks are structured as derivative contracts, which means investors often lack the legal protections, voting rights, and direct dividends enjoyed by traditional shareholders. In addition, the WSJ said, critics warn that 24/7 markets could lead to impaired decision-making and burnout among professional traders.
In another sign of tokenization’s move to the mainstream, federal banking agencies last month issued guidance reaffirming that the existing U.S. banking capital framework is essentially technology-neutral. That means that if a security is tokenized but confers the same legal rights as its conventional form, it should get the same capital treatment as that traditional security.
“[An] eligible tokenized security should be treated in the same manner as the non-tokenized form of the security would be treated under the capital rule,” an FAQ regarding the clarification reads. “Similarly, a derivative that references an eligible tokenized security should be treated for capital purposes as a derivative that references the non-tokenized form of the security.”
