In early 2021, an army of retail traders bet heavily on meme stocks and briefly melted the market. Trading volume increased so much that popular brokerage firm Robinhood had to suspend orders to buy stocks like GameStop for a few days in order to escape a liquidity crisis. At the time, the situation gave rise to allegations of conspiracy, but the reason for the collapse was more mundane: Wall Street’s creaking infrastructure couldn’t settle trades quickly enough.
Robinhood CEO Vlad Tenev and others have called for an overhaul, and since then, progress has already been made, as stock trades now settle a day earlier than in 2021. But the financial industry is also moving forward with a more radical solution: turning stocks into digital assets that can be traded and settled instantly on a blockchain.
It’s not just crypto companies and fintech players leading this “tokenization” charge. Major banks like JP Morgan are also using blockchains to facilitate transactions in certain assets and, in doing so, are transforming the financial ecosystem more broadly. Already, tokenization – which Tenev described as a “freight train” poised to devour Wall Street – has brought fundamental changes to the way stocks and other assets are traded.
The potential benefits of tokenization are enormous, but important questions remain about how to implement it. Meanwhile, some fear the coming package could undermine some protections for individual “retail” investors and destabilize a U.S. stock market whose reliability has been the envy of the world for decades.
The tokenization wave is not the first attempt to overhaul Wall Street’s covert operations. In the 1970s, traders faced what became known as the “paperwork crisis,” which saw stock markets, drowning in orders, shut down mid-week simply to keep up with record-keeping. Repeated work stoppages finally led to an IT solution.
“Once upon a time there were leather-bound newspapers that told who owned all the stocks,” says Robert Leshner, a former economist who now runs the tokenization company Superstate. “Then people said, ‘It’s too difficult, let’s not update anymore,’ so they decided to create a legal fiction that assigned ownership of all the shares to the Depository Trust & Clearing Corporation,” or DTCC.
The DTCC regime, which has been in place for decades, means that it is no longer necessary to register every transfer of shares. Instead, the clearinghouse tracks stocks held by different brokerages on behalf of their clients and settles trades between those brokerages the next business day.
In this system, brokerages theoretically own the shares, but all rights attached to them (dividends, voting privileges, etc.) remain the property of the clients. The system has worked pretty well over the decades, and for those who insist on doing things the old-fashioned way, the DTCC means they can still demand physical copies of their actions. (This option is popular with “GameStop truthers,” who believe going back to paper will thwart a Wall Street conspiracy against retail investors.)
Today, however, the current DTCC system of “T+1” – in which the clearinghouse closes trades the next business day by reconciling accounts between brokerages – has become obsolete in an era when so much business is conducted instantaneously and around the clock. This has prompted companies like Leshner’s Superstate to offer a faster alternative. The startup works with companies to issue versions of their shares that trade on a blockchain, an arrangement under which companies do not need to use intermediaries to hold or track their shares. It also means that stock trades can be settled instantly, while allowing companies to interact more directly with their shareholders.
Outside of the United States, tokenized assets are already helping investors avoid large trading commissions and invest in private companies like SpaceX.
Other companies approach tokenization in a different way. Robinhood, for example, does not help companies tokenize their shares, but rather takes shares available on the open market and offers them in a blockchain “wrap” as a sort of derivative product. These offerings are currently only available in Europe, where stock owners can buy and sell Stock Tokens alongside assets like Bitcoin.
Retail investors unfamiliar with tokenization might be surprised, or even alarmed, to discover that a company they own is trading in crypto. For now, at least, there’s nothing to worry about.
Currently, even tokenization proponents claim that the new blockchain system will exist alongside the old one rather than replacing it. So why do all this in the first place?
For the average investor who only trades occasionally, the arrival of tokenized assets won’t mean much. Active traders will appreciate the move to blockchain, however, as it opens the door to more trading after hours and on weekends. The new regime will also appeal to institutional investors, as it will release collateral that would otherwise be stuck awaiting settlement.
“Imagine you are a hedge fund and you want to buy $1 million worth of Tesla stock,” says Johann Kerbrat, senior vice president of Robinhood Crypto. “You buy it on Friday, so you’re out of money, but you don’t get the shares in your account until Monday. So for three days, you can’t do anything.” It is not just the actions that are symbolized. BlackRock’s BUIDL fund, in collaboration with Superstate’s tokenization rival Securitize, provides access to money market funds and U.S. Treasuries via blockchain, and has already reached $2 billion in assets under management. Meanwhile, JP Morgan offers tokenized versions of private equity assets on its internal Kinexys blockchain, in part because the process makes it easier to track and manage capital calls.
This is probably just the beginning. Rob Hadick, a partner at venture capital firm Dragonfly Capital, notes that other areas of finance, like credit and fixed income, are still conducted primarily in a pre-digital manner, with some transactions still formalized using a fax. The move to tokenization could allow these transactions to settle faster and more reliably. Hadick says it will also generate savings for banks and brokerages because it will reduce the ranks of back-office staff and disrupt specialized intermediaries who handle tasks like loan origination and servicing fees. Meanwhile, for traders of all types, tokenized assets will be easier to move between brokerages or provide as collateral.
It is still early, especially in the United States, where the Securities and Exchange Commission has not yet given the green light to tokenized stocks. As of mid-November, the total value of these assets worldwide was around $660 million, according to the research site RWA.xyz; the most popular include tokenized versions of index tracking ETFs and big tech stocks such as Tesla, Nvidia and Alphabet.
But that nascent state hasn’t stopped brokerages from moving forward, including crypto shop Kraken, whose tokenized versions of some U.S. stocks trade aggressively in markets like Brazil and South Africa, where traders still pay hefty commissions of up to 10% or more, even though those fees have been largely eliminated in the United States. Robinhood, meanwhile, got its hands on private shares of OpenAI and SpaceX and distributed tokenized versions of them to European customers.
As for DTCC, it would be easy to assume that the exchange is opposing the tokenization wave. Quite the contrary: According to two sources close to the company, the company is eager to get into blockchain, in part because it offers a potential way to expand into private markets. Asked for comment, DTCC did not provide details but suggested it was adopting the technology.
“DTCC believes in the power and potential of tokenization to evolve and modernize market infrastructure. We are actively working to enable capabilities that enhance our products and services,” said Brian Steele, President of Clearing and Securities Services at DTCC.
Not everyone is convinced that the rush toward tokenization is a good thing. Among those urging caution is Citadel Securities, which has asked the SEC to take a go-slow approach. According to a source close to the company, the trading giant is concerned that some crypto-aligned companies want to use the rule-making process around tokenization to gain exemptions from long-standing consumer protection obligations. The person also expressed concern that rapid change could undermine confidence in a U.S. stock market that is the world’s largest and has been fine-tuned for decades.
This concern may not be unfounded. There are already notable gaps between the prices of a company’s traditional shares and the prices of the tokenized versions offered by Kraken. At the same time, it is unclear whether each company offering tokenized shares has adequate safeguards in place regarding custody and fiduciary duties to the customer. What happens, for example, in the event that a crypto company goes bankrupt while holding token shares of a client’s stock?
And while all financial institutions seem to view blockchain as the technology of the future, they may not agree on which blockchain. Robinhood, among others, relies on the open source Ethereum chain to build its tokenization business, while JP Morgan appears committed to its own proprietary chain. According to Hadick, the venture capitalist, this situation could slow adoption because, he says, other large companies like Goldman Sachs will be reluctant to rely on a blockchain controlled by a rival.
Hadick adds, however, that a standoff is unlikely to last long, because “one thing blockchains do well is coordinate trust.”
This article appears in the December 2025/January 2026 issue of Fortune with the title: “Get ready to own a tokenized wallet. »
