Tokenized stocks are poised to launch, while traditional market infrastructure faces severe challenges

Written by: Mike Cahill, CEO of Douro Labs

Compiled by: AididiaoJP, Foresight News

Tokenized stocks are accelerating from lab pilots to the stage of real trading. However, the core infrastructure that keeps traditional stock markets operating in an orderly manner—corporate action processing, rights allocation, reference data maintenance, and settlement mechanisms—has not been prepared for this new kind of asset, which can trade across multiple venues in a continuous, uninterrupted manner. Earlier this year, Nasdaq and the New York Stock Exchange (NYSE) both received approval from the U.S. Securities and Exchange Commission (SEC), enabling the listing of tokenized versions of Russell 1000 index constituent stocks as well as major index ETFs. Meanwhile, Depository Trust & Clearing Corporation (DTCC) has also started limited-scale production trading, with plans for a full commercial rollout in October this year. More than 50 institutions participated in this trial, which clearly shows that the underlying technology is now largely mature—yet whether the traditional systems that have served public markets for the long term can keep up with the pace remains a huge question.

Two different products for the same stock may share the same code

The main route currently approved by the SEC still firmly anchors tokenized assets to the existing ownership structure. Tokenized shares will use the exact same unified securities identification procedure as traditional shares (CUSIP codes), trade on the same order book, and strictly follow the T+1 settlement cycle. DTCC’s pilot projects also adopt a similar model: the underlying real shares continue to be held in custody with Depository Trust & Clearing Corporation, while tokens become a new form of representation of ownership. Shareholders’ legal rights and status do not change in any substantive way.

However, another pathway that the SEC is reviewing is fundamentally different. As reported by the media, a so-called “innovation exemption” could allow crypto-native trading platforms to directly list tokens tied to stock prices, without needing approval from the listed company itself. Guidance published by SEC staff in January this year clearly distinguishes two major categories: tokenized securities issued by the issuer or on behalf of the issuer, and tokens issued by unaffiliated third parties—where the rights attached to the latter may match those of the underlying shares, or may differ. This exemption had been close to being released in May, but the regulator ultimately chose to defer it. Still, the core issue it raises has not gone away: from a legal perspective, a token that merely tracks a company’s stock price and the rights that truly represent ownership of that company’s shares may essentially be two different things.

This distinction may sound technical, but it directly affects investor protection and market fairness. If third-party tokens cannot fully replicate all the rights of the native shares, potential disputes and opaque risks will increase significantly.

What truly defines a stock is far more than price

Minting a token that mirrors a stock price in real time is no longer technically difficult, but fully replicating all the complex attributes carried by a real stock—far beyond what simple price data feeds can cover—entails a completely different level of difficulty and importance.

Take dividends as an example: they must be calculated precisely, withholding taxes must be deducted correctly, and payments must be made on time to the ultimate beneficial holders. Shareholder votes must be delivered accurately to the actual owners recorded on the register—not to anyone holding tokens at the moment of a snapshot. For major corporate events such as stock splits, dividend distributions, or corporate spinoffs, execution must be synchronized and accurate across all trading venues; otherwise, the same company could end up with distinctly different capital structures across different ledgers. These precise mechanisms have kept global public markets highly consistent and predictable for decades. Their design is built on centralized systems with fixed trading opening and closing times. Tokenized assets, however, may be traded around the clock on dozens of blockchains across time zones, posing unprecedented challenges to existing infrastructure.

Fragmentation: the most realistic systemic risk in tokenized markets

Multiple industry organizations, including the Securities Industry and Financial Markets Association (SIFMA), have publicly expressed concerns: if there are no unified interoperability standards and price transparency mechanisms, tokenized markets are prone to fragmentation. And if multiple unrelated third parties simultaneously issue tokenized versions of the stocks of the same listed company, this risk will be amplified many times over.

Imagine multiple independent platforms each launching tokenized products that track the same stock, but using different settlement rules, rights arrangements, and trading reporting systems. In that case, the company’s price discovery process would quietly fragment into several incompatible islands. Investors may face problems such as information asymmetry, distorted arbitrage opportunities, and even liquidity fragmentation—ultimately undermining the efficiency and confidence of the entire market.

This transformation goes far beyond a single asset class

Tokenized stocks are just a snapshot of the broader infrastructure overhaul sparked by the financial system’s embrace of blockchain technology. Nasdaq has already pushed regulators to loosen trading-hour restrictions, moving toward near-24/7 trading; the New York Stock Exchange is also building dedicated infrastructure designed to operate 24/7. However, no matter how trading hours are extended, the market still needs a reference data layer and a settlement layer that can keep up. Without the traditional concept of a “closing bell,” key processes such as net asset value (NAV) calculations, margin requirements, and index rebalancing will lose the long-standing benchmarks they have depended on.

The institutions and companies that truly lead the next stage will be the first movers capable of integrating fragmented tokenized trading venues into a single, coherent market system—ensuring that, regardless of which “track” the settlement happens through, investors receive consistent rights protections, reliable corporate action processing, and a trustworthy settlement experience.

Amid this wave, technology providers, traditional market participants, and regulators need to collaborate closely to build a new market architecture that can both unlock the efficiency benefits of blockchain and uphold the bottom line of investor protection. The rollout of tokenized stocks not only tests technological maturity, but also tests the entire financial system’s ability to adapt to the future.