Tokenized equities are expected to greatly benefit traditional markets, although they may not provide the anticipated advantages for the crypto industry, according to Rob Hadick, a general partner at the crypto venture firm Dragonfly.
“It’s undeniable that it will significantly impact TradFi,” Hadick shared with Cointelegraph during the TOKEN 2049 conference in Singapore. “They desire 24/7 trading as it enhances their economics.”
Nevertheless, he expressed skepticism regarding the advantages for leading crypto players in the real-world asset tokenization arena, like Ethereum.
The US Securities and Exchange Commission is reportedly formulating a strategy to permit blockchain-based stocks to trade on crypto exchanges following numerous financial institutions urging the regulator to facilitate continuously open markets.
Hadick mentioned that these institutions “don’t wish to be directly connected to these general-purpose chains,” citing Robinhood and Stripe as examples of entities developing their own blockchains.
“They prefer not to share the economics. They are unwilling to coexist with memecoins in terms of block space. They want control over aspects such as privacy and the validator set, and they aim to regulate their execution environment.”
Institutions seek their own authority
Hadick pointed out that utilizing layer-2 networks for tokenized stocks leads to “leakage,” as value might not redirect back to Ethereum or the wider crypto ecosystem as expected.
If financial institutions create their own layer-1 blockchains, the clarity regarding value flow to the broader crypto ecosystem would diminish.
Numerous private, permissioned blockchains have been introduced and subsequently failed in past years; however, hybrid chains—where companies retain control while having the option for permissionless operation—are now the focus for most institutions, he remarked.
“They desire their own L1s and L2s, yet seek an environment they can oversee.”
Hadick’s perspective contrasts sharply with the prevailing narratives led by figures like Fundstrat’s Tom Lee, VanEck CEO Jan van Eck, and Consensys founder Joseph Lubin, who believe that Wall Street and TradFi’s transition to on-chain will significantly benefit Ethereum and uplift the broader market.
SEC advances on tokenized equities
Several fund issuers and exchanges, including VanEck and the New York Stock Exchange (NYSE), recently conferred with the SEC regarding tokenized equities.
Related: SEC considers plan to permit blockchain-based stock trading amidst crypto momentum: Report
In September, Nasdaq filed for a rule revision to enable the listing and trading of tokenized stocks.
Tokenized stocks represent a nascent segment, comprising a minuscule fraction of the on-chain value of real-world assets, currently amounting to only $735 million, or 2.3% market share, according to RWA.xyz.
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Additional reporting by Andrew Fenton.
