The advantages of tokenizing stocks, say proponents, is a faster process for settling trades. Currently that process can take a day or more, and during intense trading periods, has led to market meltdowns. In 2021, Robinhood CEO Vlad Tenev published a blog post titled “It’s time for real-time settlement” after a settlement backlog during the peak of COVID-era meme-stock trading created a liquidity crisis for the company.
While blockchain-based trading and settlement would be faster than the existing system, the likes of Citadel Securities—which handles around 35% of retail stock trades in the U.S.—warn it could have a disruptive effect on the market. There is also the question of compliance, and whether tokenized stocks will come with traditional guardrails to prevent money laundering and other illicit activities.
In any case, the launch of tokenized stocks in the U.S. is unlikely to be imminent since, according to The Information, legacy players would likely sue the SEC to force it to engage in a detailed regulatory review rather than simply grant exemptions to existing stock trading rules.
