Blockchain and tokenization ignite innovation in financial markets

Blockchain technology has continued to fuel innovation in the financial services industry, particularly through the emergence of tokenized assets. The value of tokenized assets is expected to grow from $300 billion to $18.9 trillion by 2033, according to a recent report by Ripple and Boston Consulting Group. Those assets include stablecoins, deposits, real estate and—most notable for the capital markets sector—equities.

Tokenized equities or tokenized stocks are positioned to revolutionize trading and market access, for both public and private company shares. Alongside larger financial services firms, middle market capital markets organizations—including digital asset exchanges—are actively seeking regulatory approval to deploy tokenized stocks on their platforms.

Digital asset organizations such as Robinhood, Dinari, Gemini, Coinbase and Bybit are leading the way in offering tokenized stocks. Robinhood and Gemini have already launched these products in Europe, signaling the potential for global expansion. (This would echo a similar recent trend in event contracts, which are gaining popularity in the United States.)

What are tokenized equities?

Tokenized equities are digital representations of traditional stocks, or shares of a company, that exist on a blockchain. These tokens represent either a fraction or a whole share of the underlying equity and allow for crypto exchanges to offer traditional equities—either listed on platforms such as the New York Stock Exchange or directly on their own exchange. Tokenized equities are also seen as a mechanism to offer shares of private companies on crypto exchange platforms, depending on the model deployed by the issuer.

There are three main structures for issuing tokenized equity offerings:

• Issuer-native: The company, or issuer, initially offers the equity as a tokenized version directly on a blockchain.
• Special purpose vehicle: A separate legal entity known as a special purpose vehicle issues blockchain-based tokens that represent fractional ownership of the underlying asset the vehicle manages.
• Tracker certificate: An issuer mints an on-chain certificate that provides 1:1 price exposure to a referenced stock/exchange-traded fund, with the underlying shares held in issuer-titled custody.

Here’s a closer look at some characteristics of these structures:

What benefits do tokenized stocks offer?

Using blockchain technology for equity access comes with various benefits to broker-dealers, exchanges, crypto-native organizations and investors alike. One of the most significant advantages for investors is the potential for faster and almost instantaneous settlement when compared to more traditional trading, clearing and settlement mechanisms.

If tokenization for trading is widely adopted by exchanges and investors, it should lead to increased liquidity in the markets, as investors are able to buy and sell securities on a 24/7 basis unconstrained by the market hours of traditional exchanges.

The structure of blockchain technology also inherently allows for better transparency. This gives investors further visibility into transactions and asset ownership. Additionally, equities will be more accessible to retail investors—especially for assets that have high stock prices and those that are privatized—through fractional ownership. Private asset equity access is generally limited to accredited investors who must meet strict net worth or income requirements to qualify. As of 2024, about 87% of U.S. firms worth over $100 million in revenue are private. This means most Americans are locked out of investing in many growing companies, as companies in the U.S. have remained private for longer given the fewer initial public offerings this year. Increased retail investor access to these types of assets can in turn benefit capital markets organizations through further diversification of their customer base.

Though fractional shares are currently offered by capital markets organizations, the use of blockchains enables easier issuance and enhances transparency in the tracking of fractional shares, which remains a challenge for exchanges and broker-dealers.

This is particularly advantageous for crypto-native organizations, as they now offer more than just cryptocurrency tokens on their platforms, attracting investors seeking portfolios diversified beyond crypto assets. Investors are generally looking for a full-service financial services provider, and this further positions crypto native organizations as such.

Potential challenges of using tokenized securities

Though the offering of tokenized securities is largely beneficial to investors and capital markets organizations, it does not come without challenges and potential risks. The challenges vary by the underlying model the organization uses.

• Issuer-native model challenges: If an organization opts to deploy the issuer-native model, it must ensure the security and management of investor keys in the event a key is used to access or transfer ownership of the security. A robust key management and investor protection program is imperative, yet generally challenging for organizations. Even after an effective implementation, the success of this model itself is largely dependent on speed, reliability and investor confidence in the on-chain IPO process, which may take time for investors to embrace and understand.
• Special purpose vehicle model challenges: When deploying the special purpose vehicle wrapper model, the organization may be left vulnerable to cyberattacks and hacking, due to the sensitive nature of the organization’s mission and the confidentiality of the data within its environment. Additionally, the landscape associated with this model is filled with overlapping regulatory frameworks, creating numerous complexities and challenges for organizations to address.
  From a private company perspective, this model may be controversial, as the issuing organization does not need direct involvement from the company whose shares are being offered.

• Tracker-certificate model challenges: Lastly, under a tracker-certificate model, investors may face operational complexities around dividend handling, as dividends are often not passed through and typically do not receive voting rights, which may prompt some to trade on traditional equities exchanges. Furthermore, because the underlying shares are held in issuer-titled custody at third-party brokers or custodians and redemptions are cash-settled with the issuer, investors have limited control over the collateral and may encounter settlement bottlenecks or redemption delays.

Challenges to widespread adoption

This summer, multiple firms have announced plans to launch tokenized stock products. Robinhood and another leading cryptocurrency exchange both launched tokenized equities to European Union customers on June 30. Meanwhile, Coinbase suggested it is seeking exemptive relief to offer tokenized equities in the U.S., signaling an intent to pursue a formal path to approval.

Mentions of “tokenization” during broker-dealer and exchange quarterly earnings calls increased by 350% between Q2 2025 and Q3 2025, showing it is gaining attention in the capital markets space.

While there are not yet public statistics on market adoption, some early blockchain data indicates the market is currently shallow.

For instance, NVDAx is a Solana network token that mirrors Nvidia’s stock. Bybit’s service offering allows investors to deposit and withdraw NVDAx. There are about 8,100 NVDAx token holders with about $4.5 million in combined value. On Aug. 5, on-chain trading of NVDAx was about $150,000 from midnight to 11:59 p.m. For comparison, Nvidia’s actual stock traded roughly $27 billion to $28 billion that same day, demonstrating that NVDAx on-chain activity is fractional in comparison to traditional trading.

As demonstrated by the on-chain data, the shallow market is already producing pricing gaps and slippage. Restricted availability, a lack of shareholder rights in the tracker model and limited transferability suggest product structure limitations are having more of an impact than a lack of investor appetite for these products. To resolve these issues, more market makers need to engage in tokenized equity transactions, which should fuel liquidity. Furthermore, broader and more diversified equity listings are needed to entice investors. Lastly, clearer custody and transfer rules are needed for these products to be adopted and accepted by broker-dealers and investors alike.

However, some of these market constraints could soon be lifted. On Aug. 5, the U.S. Senate Banking Committee released a discussion draft of the proposed Responsible Financial Innovation Act of 2025. The draft directs the SEC to modernize and tailor rules for digital asset activities—including custody, recordkeeping, clearing, settlement and customer protection—for broker-dealers, ATS’s, and exchanges seeking to offer these products on their platforms. If enacted, the bill could streamline compliant tokenized equity offerings and the secondary trading of these tokens, ultimately expanding availability in the financial markets.

The takeaway

Though tokenized equities have the potential to revolutionize trading, capital markets organizations must remain mindful of the challenges they may face along the way when developing and implementing this offering. They must also understand the distinctions, benefits and risks associated with each model—and which model is best suited to help them accomplish their organizational goals.