24/7 Stock Trading: What's at Stake with Tokenized Securities

Financial markets have operated under traditional constraints for over two centuries, but cryptocurrency has changed that assumption. Bitcoin and Ethereum trade around the clock due to blockchain networks, which execute and settle transactions without relying on traditional market infrastructure.

The next logical step is bringing real-world assets onto blockchain networks so equities can potentially trade 24/7. Tokenized securities are already being developed and traded in various forms, with major financial institutions, exchanges, and fintech companies experimenting with blockchain-based equity markets.

The Securities and Exchange Commission (SEC) has acknowledged that tokenized securities are securities represented on crypto networks and have different rights for holders. The future of tokenized stocks may split into two markets: one where investors own a tokenized version of the actual security, retaining economic and legal protections associated with traditional stock ownership, and another where investors own synthetic instruments tracking the price of the stock.

The economic appeal of putting stocks on blockchain rails is clear. Blockchain can operate continuously, enabling trading outside traditional hours. Settlement is nearly instantaneous, rather than dependent on the conventional clearing cycle. Shares can be divided into small fractions, allowing investors to gain exposure to expensive stocks with little capital.