Tokenized stocks have been in the spotlight this year, but can billions of dollars of real stocks be securely connected to the yield engine of decentralized finance (DeFi)?
Sentora, a merged entity combining IntoTheBlock’s crypto data analysis with Trident Digital’s institutional yield strategies, says tokenized stocks and stablecoin markets could be the next major disruption in cryptocurrencies and traditional finance – if a list of frictions can be resolved.
Here’s a look at the top four obstacles the firm says are standing in the way.
Four key obstacles for tokenized stocks
1. Find a real use case for tokenization
Speakers who recently hosted a Sentora webinar were blunt: first-generation tokenization was mostly disappointed. Credit and real estate transactions were often illiquid, concentrated on a single issuer, and never truly embedded in DeFi as collateral. They say the real use case is for tokenized stocks placed on on-chain money markets to borrow stablecoins and generate yield on stocks that have appreciated massively, but pay no dividends, like Mag 7 stocks.
They argued that if a retail investor who invested US$10,000 in NVIDIA (NASDAQ: NVDA) and now has US$100,000 can click to borrow US$20,000 to US$30,000 at a rate of 5% without selling, this is a qualitatively new product compared to the current margin loans of around 10% made by brokers constrained by the rules of Basel in terms of capital.
At scale, they suggested that even 1% penetration of the roughly $25 trillion in US retail stocks would outpace the entire current DeFi market and could increase core DeFi returns by a few hundred basis points.
2. How Tokenized Stocks Actually Work as Collateral
Turning this vision into something robust requires solving liquidation, oracle, and market structure issues that don’t exist for purely crypto collateral. Sentora’s view is that it is a mistake to try to rebuild the Nasdaq on-chain with automated market makers and retail liquidity providers.
Liquidations should instead use cash from existing stocks. When a tokenized NVIDIA-backed loan, for example, exceeds its thresholds, a liquidator issues stablecoins, borrows the underlying shares from a securities lender, sells them to Nasdaq, and then unrolls the token wrapper once settlement has caught up.
Since this process spans multiple days, early implementations will require conservative loan-to-value ratios, wider spreads, and baseline risk tolerance between on-chain pricing and off-chain executions. Issuers like Ondo, which can wrap and unwrap in a matter of hours, are helpful, as are traditional data providers like Bloomberg and Reuters, which already broadcast stock prices at the millisecond level and can serve as the backbone for hybrid on/off-chain oracles.
The complexity is high, but their Bitcoin and Ether carry trade strategies, where smart contracts constantly leverage and deleverage to avoid liquidation, are the model they want to transfer to stocks.
3. Move real stock ownership onto the chain
Even if the mechanics work, Sentora estimates that almost none of the trillions stored in brokerage accounts can currently be used. Today’s tokenized stocks are typically newly issued products that investors purchase specifically for use on-chain; they will never unlock the scale they aim for.
The real unlock is to allow investors to transfer existing fully paid shares from brokers such as Morgan Stanley (NYSE: MS) or Schwab (NYSE: SCHW) to Kraken or Robinhood Markets (NASDAQ: HOOD) platforms and convert them to tokens as a tax-exempt event, thereby preserving beneficial ownership and avoiding capital gains.
The obstacle is issuer-by-issuer approval. Each company must allow a portion of its outstanding shares to exist on a distributed ledger. Speakers argued that the case to issuers is stronger than many tokenization providers have imagined: shares locked as DeFi collateral reduce float supply and can support prices, and adding borrowing on your shares and synthetic dividend functionality can make a non-dividend growth stock more attractive.
4. Regulation, stablecoins and the banking system
On the equity side, Sentora researchers argued that if users stick to the existing rule, whereby every share is held in the owner’s name and all rights travel with the token, there are “really no regulatory hurdles.”
The problems, they say, start with packaging that mimics economic exposure but suppresses votes and dividends.
This distinction is important because U.S. regulators have begun to look specifically at tokenized U.S. stocks and DeFi trading platforms, with an eye toward determining when these instruments begin to resemble swaps or unregistered securities.
On the financing side, everything depends on stablecoins. Neobanks and fintech companies such as PayPal (NASDAQ:PYPL), Revolut, Coinbase Global (NASDAQ:COIN), Kraken, Robinhood and others are racing to deliver abstract DeFi yield to mainstream users via tokenized deposits and on-chain money markets.
At the same time, the GENIUS Act placed stablecoins in a bank-like regulatory regime, tightening the rules for who can issue them and how reserves must be maintained, while major U.S. banks are pushing to slow or shape this move to protect deposit franchises. This tension is likely to define the pace at which symbolic share guarantees can evolve.
Additional Market Cautions for 2026
Regime change and interest rate risk
The rise of this sector occurred during a period of high cash yields, allowing tokenized Treasuries and money market real-world assets (RWA) to offer high percentage returns with low duration risk. As policy rates fall, tokenized Treasury products become less attractive, increasing pressure on tokenized stocks to generate truly differentiated upside potential in the form of leverage, tax efficiency, or synthetic dividends rather than simply being a new wrapper of low yields.
Fragmentation of platforms and liquidity
While DeFi is often considered a single venue, liquidity is dispersed across Ethereum L2, BNB Chain, Solana, application-specific rollups, and specialized RWA platforms. Early tokenized equity collateral markets are already experimenting on non-Ethereum ecosystems, increasing the risk of fragmentation of Oracle depth, pricing and infrastructure before a critical mass of standards and interoperability is in place.
Raw materials and other RWA competition
Tokenized commodities such as gold, along with short-duration bond funds and private credit pools, are emerging as rival “default collateral” choices for institutions that want on-chain returns without equity risk. Tokenized stocks will compete not only with Bitcoin and Ether, but also with a growing number of seemingly more secure RWA products with potentially clearer capital regulatory treatment for banks and insurers.
Risk of centralization and concentration
Finally, the vision relies on a small number of critical intermediaries: custodians, tokenization agents, oracle providers, and centralized exchanges that connect the DeFi and public equity markets.
In 2026, tokenization infrastructure is still concentrated among a few large players, and a restriction or policy change in one could ripple across multiple protocols that treat tokenized shares as immaculate collateral. Building credible resolution and risk-sharing frameworks around these chokepoints is an unsolved but essential problem if tokenized actions are to become the next major disruption rather than the next over-promised narrative.
Latest developments on tokenized stocks
On Wednesday, February 11, Sentora introduced Stey, a new yield vault that allows investors to earn extra money from digital stocks by placing them in a secure automated system that earns interest.
Stey is designed to work with Ondo’s tokenized offerings, such as its tokenized treasuries and 200+ tokenized stocks. In partnership with Ondo, Sentora ensures that digital shares in Stey vaults comply with regulations and are backed by physical securities in custody. Additionally, Sentora’s partnership with Chainlink ensures that these stocks are accurately priced with real-time data, and Euler manages lending strategies that generate additional interest.
Sentora plans to expand beyond these three areas, aiming to add more types of digital assets from different partners and use different lending platforms to find the best interest rates for users.
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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
