Tokenized equities are poised to significantly benefit traditional markets, although their impact on the crypto industry may not be as advantageous as some have anticipated, according to Rob Hadick, general partner at crypto venture firm Dragonfly.
“There’s no doubt it has a big effect on TradFi,” Hadick informed Cointelegraph during the TOKEN 2049 conference in Singapore. “They are looking for 24/7 trading, which enhances their economic model.”
However, he expressed uncertainty regarding the advantages for prominent crypto entities in the real-world asset tokenization arena, such as Ethereum.
The US Securities and Exchange Commission is reportedly crafting a strategy to facilitate blockchain versions of stocks trading on crypto exchanges, following requests from various financial institutions for always-open markets.
Hadick mentioned that these institutions “prefer not to be directly on general-purpose chains,” citing Robinhood and Stripe as examples of companies developing their own blockchains.
“They don’t want to share the economics. They don’t want to share block space with memecoins. They prefer to maintain control over privacy, the validator set, and the execution environment.”
Institutions seek their own control
Hadick noted that if tokenized stocks operate on layer-2 networks, it might lead to “leakage,” where value does not return to Ethereum or the broader crypto ecosystem as expected.
Should financial institutions construct their own layer-1 blockchains, it would become “somewhat unclear” how value would integrate into the wider crypto ecosystem.
While several private permissioned blockchains have launched and subsequently failed in recent years, he stated that hybrid chains—where companies maintain control but also have permissionless options—are currently favored by most institutions.
“They desire their own L1s and L2s, but they want an environment under their control.”
Hadick’s perspective contrasts with that of figures like Fundstrat’s Tom Lee, VanEck CEO Jan van Eck, and Consensys founder Joseph Lubin, who believe that Wall Street and TradFi transitioning onchain will greatly benefit Ethereum, subsequently uplifting the broader market.
SEC advances on tokenized equities
Recently, several fund issuers and exchanges, including VanEck and the New York Stock Exchange (NYSE), engaged with the SEC to discuss tokenized equities.
Related: SEC considers plan to allow blockchain-based stock trading amid crypto push: Report
In September, the Nasdaq applied for a rule modification to enable it to list and trade tokenized stocks.
Tokenized stocks represent an emerging sector, accounting for a mere fraction of the total onchain value of real-world assets, currently only $735 million, or 2.3% of the market share, according to RWA.xyz.
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Additional reporting by Andrew Fenton.
