Tokenized stocks enter the real trading era: infrastructure lagging behind, fragmentation risk has quietly approached.

Written by: Mike Cahill, CEO of Douro Labs

Translated by: AididiaoJP, Foresight News

Tokenized stocks are accelerating from laboratory trials to the real trading stage, but the core infrastructure that supports the orderly operation of traditional stock markets—corporate actions processing, rights distribution, reference data maintenance, and settlement mechanisms—has not been prepared for this new type of asset that allows trading across multiple venues and continuously. Earlier this year, Nasdaq and the New York Stock Exchange respectively received approval from the U.S. Securities and Exchange Commission (SEC) to list tokenized versions of Russell 1000 index constituents and mainstream index ETFs. Meanwhile, the Depository Trust & Clearing Corporation (DTCC) has also initiated limited-scale production trading, planning to achieve full commercialization by October this year. Over 50 institutions participated in this experiment, demonstrating that the underlying technology is fundamentally mature—however, whether the traditional systems that have served public markets for a long time can keep up with the pace remains a major question mark.

The same stock, two different products may share the same code

The main path currently approved by the SEC still firmly anchors tokenized assets to the original ownership structure. Tokenized shares will use the same uniform securities identification procedures (CUSIP codes) as traditional shares, trade on the same order book, and strictly adhere to a T+1 settlement cycle. The DTCC's pilot project also adopts a similar model: the underlying real shares continue to be held by the depository trust company, while the tokens become a new form of ownership representation. Shareholders' legal rights and positions remain essentially unchanged.

However, another path currently under review by the SEC is entirely different. According to media reports, a so-called "innovation exemption" may allow crypto-native trading platforms to directly list tokens linked to stock prices without the approval of the listed company itself. Guidance issued by SEC staff in January of this year clearly distinguished between two categories: tokenized securities issued by the issuer or on behalf of the issuer, and tokens issued by unrelated third parties—the rights associated with the latter may be consistent with the underlying shares or may differ. This exemption was close to being published in May, but regulators ultimately chose to delay. Nevertheless, the core issue it raised has not disappeared: from a legal perspective, a token that merely tracks a company's stock price may be fundamentally different from the equity that truly represents ownership of that company's shares.

This distinction seems technical but is directly related to investor protection and market fairness. If third-party tokens cannot fully replicate all rights of the underlying shares, the potential for disputes and risks of opacity will significantly increase.

What truly defines a stock goes beyond price

Creating a token that can mirror stock prices in real time is no longer a technical challenge, but fully replicating all the complex attributes carried by real stocks—far beyond what simple price data feeds can cover—is of a different level of difficulty and importance.

For example, dividends must be accurately calculated, correctly withheld for tax purposes, and timely paid to the ultimate rights holders; shareholder votes must be accurately delivered to all owners officially recorded, rather than anyone who holds the token at a snapshot moment; major events such as stock splits, dividends, or corporate spin-offs must be synchronously and accurately executed across all trading venues, otherwise, the same company may present completely different capital structures on various ledgers. These precise mechanisms have maintained a high degree of consistency and predictability in global public markets for decades, with a design foundation centered around a centralized system with fixed opening and closing times. However, tokenized assets could achieve around-the-clock, cross-time zone continuous trading across multiple blockchains, posing an unprecedented challenge to existing infrastructures.

Fragmentation: the most realistic systemic risk of the tokenized market

Several industry organizations, including the Securities Industry and Financial Markets Association (SIFMA), have publicly expressed concerns: without a unified connectivity standard and price transparency mechanism, the tokenized market is prone to fragmentation. If multiple unrelated third parties simultaneously issue tokenized versions of the same listed company's shares, this risk will be magnified.

Imagine multiple independent platforms each launching tokenized products tracking the same stock but using different settlement rules, rights arrangements, and transaction reporting systems. In this case, the price discovery process for that company would quietly decentralize into several incompatible islands. Investors might face issues of information asymmetry, distorted arbitrage opportunities, and even liquidity fragmentation, ultimately undermining the efficiency and confidence of the entire market.

This transformation extends far beyond a single asset class

Tokenized stocks are merely a microcosm of the comprehensive transformation of infrastructure triggered by the financial system's embrace of blockchain technology. Nasdaq is independently pushing regulators to relax trading hour restrictions, moving towards nearly round-the-clock 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 requires a set of reference data and settlement layers that can keep up with the pace. Without a traditional "closing bell," core processes like net asset value (NAV) calculation, margin requirements, and index rebalancing will lose the long-term benchmark they relied on.

The institutions and enterprises that can truly lead the next stage of development will be those pioneers capable of integrating the disparate tokenized trading venues into a single, coherent market system—ensuring that regardless of which "track" the trade is settled through, investors receive consistent protection of rights, reliable corporate action processing, and a trustworthy settlement experience.

In this wave of change, technology providers, traditional market participants, and regulators need to collaborate closely to create a new market framework that can both unleash the efficiency dividends of blockchain and uphold the bottom line of investor protection. The successful implementation of tokenized stocks will not only test the maturity of the technology but also the entire financial system's ability to adapt to the future.