Author: Mike Cahill, CEO of Douro Labs
Compiled by: AididiaoJP, Foresight News
Tokenized stocks are accelerating their journey from lab pilots to real trading stages. However, the core infrastructure that supports the orderly operation of traditional stock markets — corporate actions processing, rights distribution, reference data maintenance, and settlement mechanisms — is not prepared for this new type of asset, which trades continuously across multiple venues. Earlier this year, both Nasdaq and the New York Stock Exchange (NYSE) received approval from the U.S. Securities and Exchange Commission (SEC) to list tokenized versions of Russell 1000 index component stocks and mainstream index ETFs. Meanwhile, the Depository Trust & Clearing Corporation (DTCC) has also initiated a limited-scale production trial, planning a full commercial launch in October this year. Over 50 institutions participated in this trial, strongly indicating that the underlying technology is largely mature — yet whether the legacy systems that have long served public markets can keep pace remains a significant question mark.
One Stock, Two Different Products May Share the Same Code
The primary path currently approved by the SEC remains firmly anchored to the original ownership structure. Tokenized shares will use the exact same CUSIP (Committee on Uniform Security Identification Procedures) codes as traditional shares, trade on the same order books, and strictly adhere to the T+1 settlement cycle. DTCC's pilot project adopts a similar model: the underlying real shares continue to be custodied at the Depository Trust Company, while the tokens become a new representation of ownership records. Shareholders' legal rights and status undergo no substantive change.
However, an alternative path under review by the SEC is quite different. According to media reports, a so-called 'Innovation Exemption' might allow crypto-native trading platforms to directly list tokens pegged to stock prices without obtaining approval from the listed company itself. Guidance issued by SEC staff in January this year clearly distinguishes between two major categories: tokenized securities issued by or on behalf of the issuer, and tokens issued by unaffiliated third parties — the rights attached to the latter may or may not align with those of the underlying shares. This exemption was reportedly close to release in May, but regulators ultimately chose to pause. However, the core issue it raises persists: legally speaking, a token that merely tracks a company's stock price and one that truly represents ownership rights in that company's shares may be fundamentally different things.
While this distinction may seem technical, it directly relates to investor protection and market fairness. If third-party tokens do not fully replicate all the rights of the native shares, the potential for disputes and opacity increases significantly.
What Defines a Stock is Far More Than Just Price
Minting a token that mirrors stock prices in real-time is no longer a technical challenge. However, accurately replicating the full, complex attributes embedded in a real stock — far beyond what a simple price data feed can cover — presents a difficulty and importance of a completely different order.
Take dividends, for example. They must be calculated precisely, have taxes correctly withheld, and be paid promptly to the ultimate beneficial owners. Shareholder votes must be accurately delivered to the actual holders of record, not whoever happens to hold the token at a snapshot moment. Major corporate events like stock splits, dividends, or spin-offs must be executed synchronously and accurately across all trading venues; otherwise, the same company could end up with vastly different capital structures on different ledgers. These intricate mechanisms have maintained a high degree of consistency and predictability in global public markets for decades, designed around centralized systems with fixed opening and closing times. In contrast, tokenized assets could trade continuously 24/7 across dozens of blockchains and time zones, posing an unprecedented challenge to the existing infrastructure.
Fragmentation: The Most Realistic Systemic Risk for Tokenized Markets
Several industry organizations, including the Securities Industry and Financial Markets Association (SIFMA), have publicly expressed concerns: without unified standards for interoperability and price transparency, tokenized markets are highly susceptible to fragmentation. This risk is compounded if multiple, unaffiliated third parties simultaneously issue tokenized versions of the same listed company's stock.
Imagine several independent platforms listing tokenized products tracking the same stock, but with different settlement rules, rights arrangements, and trade reporting systems. The price discovery process for that company would then quietly disperse into several incompatible silos. Investors could face issues like information asymmetry, distorted arbitrage opportunities, and even fragmented liquidity, ultimately harming the efficiency and confidence of the entire market.
This Transformation Goes Far Beyond a Single Asset Class
Tokenized stocks are just one example of the comprehensive infrastructure transformation triggered by the financial system's embrace of blockchain technology. Nasdaq is already separately urging regulators to relax trading hour restrictions, moving towards near-24/7 trading. The New York Stock Exchange is also building dedicated infrastructure designed for 24/7 operation. However, regardless of how trading hours are extended, the market still needs a reference data layer and a settlement layer that can keep pace. Without a traditional 'closing bell,' core processes like Net Asset Value (NAV) calculation, margin requirements, and index rebalancing lose the reference point they have long relied upon.
The institutions and companies truly poised to lead the next phase will be the pioneers capable of integrating disparate tokenized trading venues into a single, coherent market system — ensuring that regardless of which 'rail' a trade settles on, investors receive consistent rights protection, reliable corporate actions processing, and a trustworthy settlement experience.
In this wave, technology providers, traditional market participants, and regulators need to collaborate closely to jointly build a new market architecture that can unlock blockchain's efficiency dividends while upholding the bottom line of investor protection. The implementation of tokenized stocks tests not only the maturity of technology but also the entire financial system's capacity to adapt to the future.
