Crypto’s Audacious Bid to Rebuild Stock Market on the Blockchain

(Bloomberg) -- First, they came for the currency market. Then, the money market. Now, crypto’s big disruptors are targeting the multi-trillion-dollar heart of global capitalism: the stock market.

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Dismissed as a fringe fantasy years ago after a regulatory backlash and the collapse of early projects, the first attempts by the digital-asset industry to put shares on the blockchain fizzled out. This time, a new cohort of players — from crypto giants Coinbase Global Inc. and Kraken to retail favorite Robinhood Markets Inc. — is making a fresh run at rewiring the very plumbing that governs equities around the world.

The ambition is predictably audacious from a crypto community built to gut out the middlemen and outsmart the regulator. The promise: a financial system where trading Apple Inc. or Tesla Inc. stock is as fast and easy as sending a text message. No more extended settlement periods. Just instant, cross-border transactions, around the clock, five, or even seven, days a week.

But beneath the braggadocio lies profound challenges that threaten this tokenization effort, or the process of creating digital representations of real-world assets on a decentralized network. The effort runs straight into custody and counterparty risk: each token is typically backed by a real-world share that must be funded and held in custody. Stock investing also involves a complex web of legal protections, ownership structures and corporate actions deeply embedded in centralized, regulated systems. This world of complexity makes tokenizing stocks a world away from the likes of digital art.

“You are changing the way things are trading,” said Bryan Routledge, an associate professor of finance at Carnegie Mellon University’s Tepper School of Business. “You’re not just changing the format of an asset.”

Despite the hurdles — and fundamental questions about whether demand for these products even exists — players are lining up. Kraken’s Bermuda entity plans to start selling tokenized stocks in late June, and Robinhood is preparing a similar service in Europe. Many such efforts are debuting in overseas jurisdictions, seen as crucial test beds while the US regulatory picture remains in flux. Startups like Ondo Finance are planning launches this summer, and Dinari hopes to offer tokenized equities trading in the US in the coming months. Galaxy Digital has been talking with regulators about tokenizing its shares. Securitize, a digital-asset securities platform known for helping BlackRock Inc. digitize a money-market strategy, is another key player at the center of the push.

“We are talking to many different asset issuers of both existing publicly traded equities as well as about a lot of organizations thinking about doing on-chain IPOs,” said Michael Sonnenshein, chief operating officer of Securitize.

The token, stored in a crypto wallet like an e-ticket on a phone, is a unique, transferable digital receipt. It’s the verifiable proof of a claim on one real share, held in trust by a regulated financial institution. Whether it truly mirrors a stock’s price comes down to a simple test: can it be swapped for the real thing? In the safest setups, the answer is yes, which keeps prices in sync. But often, the token is just a digital I.O.U. from the issuer, and its value depends entirely on trusting that company to pay up.

The initiative isn’t happening in a vacuum. It’s one front in a broader effort to move real-world financial assets onto blockchains, a market McKinsey & Co. projects could reach $2 trillion by 2030. So far, the clearest successes have been in tokenizing assets with simpler plumbing. The market for on-chain US Treasuries, led by firms like Securitize and Ondo, now exceeds several billion dollars. Major players like BlackRock and Citigroup are actively digitizing funds to improve efficiency and appeal to crypto-friendly users. But tackling public equities is a higher order of ambition, targeting the dynamic, live-wire infrastructure of capitalism itself, where corporate actions like mergers, stock splits, and shareholder votes happen in real time.

Fueling the push, the election of Donald Trump has raised hopes among proponents that their plans can achieve critical mass with regulators. Hester Peirce, who leads the Securities and Exchange Commission’s crypto task force, has spoken favorably about tokenization in recent months, suggesting that trial runs in contained settings — known as “sandbox structures,” where firms can operate under relaxed rules to test new models — may be a way to test the concept.

That way, “innovating firms are able to get to market quickly under appropriate, reasonably calibrated conditions,” she said in a May 8 address. “They do not have to comply with inapt regulations, which, in many cases, were developed well before the technologies being tested existed and may be obviated by attributes of that technology.”

Still, as each player builds its own token with a unique risk profile, it’s an open question whether the industry will manage to create a unified and liquid market. Regulators’ caution is rooted in recent history. The idea of a blockchain-based stock was broached as far back as 2015 by the former chief of Overstock.com, but efforts have remained niche. Back in 2021, Exodus Movement Inc. tokenized its shares via Securitize, yet today those shares still account for around 78% of all tokenized equities.

The total market stands at just $388 million, according to tracker RWA.xyz, a fraction of the $120 trillion-plus global equities market. A more ominous precedent was set by the Mirror Protocol on the Terra blockchain, which drew SEC scrutiny even before Terra’s collapse triggered some $40 billion in losses.

That history explains the establishment’s measured pace. Depository Trust & Clearing Corp., which settles most US stock trades, is treading lightly, with a planned pilot later this year expected to involve a small cohort of institutional players in a controlled setting.

“We have no desire to do this in a big bang,” said Nadine Chakar, global head of DTCC Digital Assets.

Proponents argue the push creates new rails for global finance. In places with unreliable financial systems, the appeal of direct access to US equities is clear. The vision, according to DTCC’s Chakar, is one of 24-hour trading, faster settlement, and the ability to use stocks as collateral in decentralized apps. This resonates with crypto-native investors who, according to Wyatt Lonergan of VanEck Ventures, “want the comfort of, say, Apple stock” within their digital ecosystem, especially during volatile crypto markets.

But for the average US investor, these are largely solved problems, with fractional shares and one-day settlement already standard. This raises the central, unanswered question of whether this represents genuine, scalable demand or simply a convenient narrative. With no real evidence that mainstream investors are asking for these products, the tokens risk being viewed as just the latest shiny digital object for platforms in a constant search for new revenue streams.

All told, it’s the latest offensive in crypto’s war on Wall Street. The industry is riding a $3 trillion bull market, a political thaw in Washington, and fresh momentum in infrastructure.

“It definitely will be competition,” Routledge said, predicting a clash with the entire ecosystem of exchanges and brokers. “If you look at the growth of trading in cryptocurrencies, it was this analog of tokenization that really lit the fuse.”

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