Tokenized equities promise significant advantages for traditional markets, yet may not prove beneficial for the crypto sector as previously anticipated, according to Rob Hadick, general partner at the crypto venture firm Dragonfly.
“There’s no doubt it has a big effect on TradFi,” Hadick stated in an interview with Cointelegraph during the TOKEN 2049 conference in Singapore. “They want 24/7 trading; it enhances their economics.”
Nevertheless, he expressed skepticism regarding the advantages for leading crypto entities involved in real-world asset tokenization, like Ethereum.
The US Securities and Exchange Commission is allegedly formulating a strategy to permit blockchain versions of stocks to be traded on crypto exchanges, following advocacy from numerous financial institutions for year-round market access.
Hadick mentioned that these institutions “don’t want to be directly on these 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 aim to control aspects like privacy [and] the validator set, wanting to govern what transpires in their execution environment.”
Institutions seek autonomy
Hadick noted that if tokenized stocks utilize layer-2 networks, it could lead to “leakage,” as value may not revert to Ethereum or the broader crypto ecosystem as effectively as anticipated.
If financial institutions establish their own layer-1 blockchains, the pathways for value to flow into the larger crypto ecosystem would become “a little less clear.”
Although several private permissioned blockchains have been introduced and subsequently failed in prior years, he indicated that hybrid chains—where companies maintain control while having a permissionless option—are the current trend among most institutions.
“They want their own L1s and L2s, but desire a controlled environment.”
Hadick’s perspective contrasts sharply with the prevailing narrative put forward by figures such as Fundstrat’s Tom Lee, VanEck CEO Jan van Eck, and Consensys founder Joseph Lubin, who argue that Wall Street and TradFi moving onchain will bring substantial advantages for Ethereum, potentially benefiting the broader market.
SEC advances on tokenized equities
Recently, several fund issuers and exchanges, including VanEck and the New York Stock Exchange (NYSE), have had discussions with the SEC regarding tokenized equities.
Related: SEC weighs plan to allow blockchain-based stock trading amid crypto push: Report
In September, the Nasdaq applied for a rule change to facilitate the listing and trading of tokenized stocks.
Tokenized stocks are an emerging sector, currently accounting for a small fraction of the total on-chain value of real-world assets, with only $735 million, or 2.3% of the market share, according to RWA.xyz.
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Additional reporting by Andrew Fenton.
