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As 2026 approaches, efforts to integrate on-chain stock markets are only accelerating, as the promise of 24/7 trading and near-instant settlement gains increasing global attention. What was previously locked behind broker infrastructure is now hailed by its supporters as “modernization,” but there is something they are not considering.
Summary
- Tokenized stocks promise speed, not immunity from risk or regulation: on-chain stock transfer does not eliminate securities law, market inequality, or systemic risk, and pretending otherwise weakens investor protections.
- Liquidity and governance are the real fault lines: rapid settlement without significant liquidity, disclosure, custody, and shareholder rights risks flash crashes and “phantom assets” that lie outside of a credible market structure.
- Tokenization must provide market guarantees: on-chain actions only work if they fully preserve regulatory compliance, enforceable property rights and institutional-level standards; otherwise, modernization turns into erosion.
Behind the appearance of efficiency lies the fact that moving shares to blockchain will not eliminate regulation, structural inequalities or risks. If the industry moves in this direction without discipline, the transition to on-chain stock trading could remove the protections that keep public markets reliable.
The tokenization of shares is, in fact, a new experiment in market structure, but with challenges that go well beyond convenience. Investor demand for these tokenized options is increasing, and companies like Nasdaq are already working with regulators to list and trade tokenized stocks.
If the ambition is real, the protections that investors expect from regulated equity markets must be fully translated into their symbolic equivalents. The transition must have trading mechanisms anchored in a smart contract and preserve the custody, disclosure, and governance that ultimately underpin the legitimate markets that already exist.
The promise of speed
On-chain stocks can settle trades almost instantly, reducing the tedious cycles associated with this form of trading, and freeing up capital faster for better use. It’s easy to see the appeal when cross-border investors benefit from easier access, fractional ownership, fewer jurisdictional hurdles, and the biggest advantage over non-tokenized options: speed.
World Economic Forum analysts have already highlighted the benefits of on-chain stock trading, including predictable settlement, reduced reconciliation fees, and programmable corporate actions, as bold steps toward tokenization. For the first time, retail investors do not need a custodian intermediary to access blue-chip fractional shares.
The involvement and speed of blockchain opens up stock markets to global accessibility rather than geographic stratification. These are all tangible benefits that on-chain stock trading offers, but speed without proper governance quickly proves to be a hollow victory for everyone involved.
While the hype of tokenized stocks is evolving faster than the law, agencies like the U.S. Securities and Exchange Commission have already taken action. Sensing both opportunity and threat, the SEC is considering limited exemptions to allow blockchain-based stock trading, but only under controlled conditions.
Liquidity Mirages and Regulatory Gaps
Amid all this commotion, often overlooked are the perils of on-chain stock trading, namely the under-discussed threat of liquidity. On-chain assets trade quickly, but that doesn’t necessarily mean they trade deeply.
Academic research indicates that tokenized assets (even those with real-world backing) face severe liquidity disruptions, particularly during spikes in volatility. Synthetic stocks with thin order books and insufficient liquidity to absorb the selloffs are just flash crashes waiting to happen.
If companies or exchanges try to circumvent securities law by claiming that being on-chain is equivalent to being “out of jurisdiction”, then the entire system could collapse after being labeled a shadow market.
The SEC has previously stated that tokenized stocks will remain classified as securities and will be subject to all regulatory obligations. And a token that looks like a stock, trades like a stock, and behaves like a stock is a stock.
Anything less than that and the absence of regulatory compliance checks is a phantom asset, nothing more.
Standards must rise, otherwise they will fall
Now is the time to choose whether to embrace tokenized shares as a real upgrade and protect investors, or to use blockchain as a weapon to erode the safeguards that make public markets trustworthy.
Tokenized shares must confer authentic shareholder rights, include enforceable dividend and corporate action claims, and adhere to the same disclosure and reporting rules as modern markets. Regulators have already made their position clear; now, safeguards and compliance must lead the way.
The potential benefit of on-chain stock trading is enormous, but only if the custody, liquidity and legal protections are carried over from the public markets tested. Tokenization should elevate equity markets, not hollow them out, so that tokenized stocks can maintain the accountability that modern equity markets demand.
Standards must be raised to meet economic demands for investor security, otherwise tokenized stocks will fall to the sidelines. The industry will reveal the choice made in due course.
