According to several executives in the crypto sector, digital asset treasury (DAT) firms that tokenize their stocks on the blockchain increase risks for both investors and their businesses.
“Blockchains operate 24/7, while traditional markets have specific trading hours,” stated Kadan Stadelmann, chief technology officer of the Komodo decentralized exchange platform, in an interview with Cointelegraph.
Significant onchain price fluctuations that happen outside of conventional market hours could trigger a rush on stocks for a treasury firm that has released both tokenized and traditional shares, without giving the company adequate time to respond to a price shift.
Stadelmann further emphasized that risks from smart contract vulnerabilities due to code exploits or potential hacking of the underlying funds held by the crypto treasury firm and the tokenized shares amplify the overall risk. Kanny Lee, the CEO of decentralized exchange SecondSwap, remarked:
“Tokenizing DAT equity creates a synthetic on top of a synthetic. Investors end up exposed twice, once to the volatility of the treasury’s crypto and again to the complexity of corporate equity, governance, and securities law. That’s a lot of risk layered onto already volatile assets.”
Tokenized stocks are becoming increasingly popular as numerous firms now have tokenized shares, and the US Securities and Exchange Commission (SEC) is hinting at 24/7 capital markets. Nonetheless, the uncertainty of legal regulations places tokenized stocks in a murky regulatory landscape.
Related: SEC’s tokenized stock initiative holds unclear advantages for crypto: Dragonfly Executive
SEC and stock exchanges advocate for tokenized equities and continuous trading
The SEC is examining blockchain-based stock trading as a means to modernize the outdated trading system, which observes nights, weekends, and holidays off while having prolonged settlement times in comparison to digital asset technology.
SEC officials are contemplating plans to allow regulated retail crypto exchanges to offer tokenized stock trading to clients in the United States.
Traditional stock exchanges, such as the tech-oriented Nasdaq and the New York Stock Exchange (NYSE), are also advocating for extended trading hours to keep pace with the cryptocurrency markets that operate non-stop.
In March, Nasdaq revealed plans to provide 24-hour trading five days a week, aiming for a rollout of the expanded trading hours in the latter half of 2026.
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