Cryptocurrency exchanges begin offering tokenized securities
67 comments
·July 21, 2025seanhunter
lxgr
ADRs are largely a US thing, as far as I know. For example, many US companies list on European exchanges as a secondary listing using their US ISIN, not as an EDR.
seanhunter
Yes, although without getting too deep in the weeds, in the UK and Europe, asset-backed bonds are often issued using a similar process. The actual bonds are often held by a depositary and the holder just gets a depositary receipt rather than the bond itself. This is done largely for ease of settlement I believe.
The point is the mechanism here is reasonably well-established in normal finance.
matthewaveryusa
Would tokenized shares remove the need for VIEs and contractual custodians in the Cayman islands for Chinese ADRs?
seanhunter
I don’t actually know but my guess is that this wouldn’t change the actual legal requirement but it may make it possible for people to buy the exposure while legally not being qualified to own the underlying security.
lxgr
Approximately everybody in the US is able to get a brokerage account for trading public shares (with actual SIPC insurance, very limited liability for fraud etc). At the same time, the publicly investable stock market constitutes less and less to the total universe of US companies.
Unless tokenized securities will somehow make private investments accessible to non-accredited investors, this initiative seems to be entirely missing the elephant in the room, at least in the US.
csdreamer7
If you can shift these tokens around like Bitcoin my first thought was tax or sanctions evasion. Buy some VOO tokens from a 3rd party since you know your corrupt government (and you made money from that corruption) will seize your bank account for any reason. You hold these tokens in a private wallet stored somewhere for a few decades as your escape plan.
There was an article on how cut-throat (pun intended) low the margins are for money laundering in the competition between businesses to get drug trafficked US dollars from Mexico to China.
lxgr
If you don't trust your own government, but the US government and financial institutions, couldn't you just open a US brokerage account?
And conversely, if the US government doesn't want you as a shareholder (and by extension US financial institutions can't serve you), good luck to anyone trying to (knowingly or negligently) redeem any VOO that you've touched.
rtkwe
Governments are more practiced at blocking money from moving around with traditional services like banks with crypto they have a tougher time locking down the avenues because anyone offering $LOCAL_CURRENCY to crypto is a place money can leak out of the country around traditional money controls.
There's a reason real estate is one of the more popular ways for chinese nationals to move large amounts of money abroad, it's one of the less restricted ways to move large sums of money out of the country. So there's a lot of interest in expensive real estate not for occupation but just to buy to get cash out of the country into a stable asset that can be sold or borrowed against.
NickNaraghi
The main value proposition is faster settlement.
The big institutions can measure their profits in terms of settlement time, going from 2 days to 1 day (previous infrastructure upgrades) to instantaneous (this) makes them more money.
lxgr
I see how it can make sense on the settlement layer, but that's of absolutely no relevance to individual investors, which is who Robinhood are targeting.
In the EU, as far as I remember most modern brokers let you buy shares with unsettled proceeds of others without restrictions; in the US, getting a margin account takes no effort at all and bypasses the freeriding rules too.
NickNaraghi
Unfortunately, Robinhood makes money by selling individual investor orderbook data to the big guys so they can front-run them
chollida1
Can you explain how shorter settlement time is a benefit to retail clients who buy these tokenized stocks?
Or how you see big institutions making more money by reducing settlement time?
Jessibot
‘Advocates say tokenization is the next leap forward in crypto and can help break down walls that have advantaged the wealthy and make trading cheaper, more transparent and more accessible for everyday investors. But critics say tokenization threatens to undermine a century’s worth of securities law and investor protections that have made the U.S. financial system the envy of the world’. The problem with securities laws is that they are complex, and even defining what is a security is a hotly debated question, esp in crypto. I believe back in 2021, Binance had to pull back their offerings tokenized securities bc of german regulators, so its a very opaque environment.
toenail
Yeah.. as long as a judge can say that a security belongs to party X and not to the owner of tokens... tokenized securities are useless, they could just be a database record.
rtkwe
Normal stocks exist in a similar way for 99% of people. You don't own them directly you're the 'beneficial owner' and your ownership is just a database entry in your broker's database backed up contractually. It's the legal hack that lets you just press buy or sell and have it happen almost instantly instead of taking days to move around the paper stock certificates from one vault to another. Even if you go through the trouble of direct registration it's still basically a database entry.
toomuchtodo
I can go to FINRA and the SEC if someone does not deliver or properly custodian my security. Who do I go to when the blockchain doesn't? The value is not in the technical implementation, the value is in the trust and legal framework around ownership and counterparty transactions.
(paper stock certificates are no longer a thing except in rare circumstances, digitization took place long ago ["dematerialization"] at the clearinghouse)
rtkwe
These could be backed by the same SEC and FINRA requirements kind of have to see how the regulation plays out. I'm not super optimistic about it given their current attitudes towards crypto but this does more directly mix with the normal stock market so who knows where the rules will come down on this, they can regulate anyone claiming to offer tokenized securities to hold them purely 1-1 on the stock transfer agent of the companies for example, you don't have to regulate the 'blockchain' as an amorphous concept there will individuals/companies offering these tokens after all.
toenail
> I can go to FINRA and the SEC if someone does not deliver or properly custodian my security. Who do I go to when the blockchain doesn't?
You can go to FINRA and the SEC.
conception
“They could just be a database record” is the response for pretty much all legal crypto uses.
toenail
Saving in bitcoin to escape inflation works fine for me and is perfectly legal.
johnecheck
That sounds like a strategy that's going to work really well until it doesn't.
Perhaps I'm wrong. Good luck!
ToucanLoucan
It's almost like it was never designed at all to solve any of the actual problems with the finance system and just create a new one next to it with a different set of assholes at the top of it.
cindyllm
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TrackerFF
Someone explain to me like I’m 5 how tokenization makes it possible to trade private companies. Wouldn’t that mean that the owners of those private companies are somehow issuing tokens related to their ownership?
Or is this yet another magical crypto thing where we collectively agree/imagine that tokens are somehow pegged to private companies, without any direct ownership to said companies?
dmoy
It's naked forwards, except with even less regulation.
Matt Levine has a good rundown here: https://www.bloomberg.com/opinion/newsletters/2025-06-26/any...
TrackerFF
Thanks
Makes me wonder what happens if/when the next WeWork or Theranos rolls around, and people are invested via these types of trades.
theragra
Equity of private companies is bought from employees and investors (not real equity, often, but promise to give equity after exit), then tokenized
dreamcompiler
I assume customers will by buying into this stuff with stablecoins, which have the amusing property of being nonvolatile until the day their value plunges to zero over the course of a few minutes.
tossandthrow
Have you looked at DEI / MakerDAO? They appear to be quite stable. But they are over collateralized as a stable coin should be.
Also the dollar backed ones would only fail if the foundations behind them fail (Eg. USDC)
latchkey
The interesting thing here is that it was TradFi screwing things up for Crypto...
https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dolla...
tossandthrow
It seems to be at 0.999 - which like prices in the counter party risk.
(Whether the risk is prices correctly can be discussed)
FollowingTheDao
"Advocates say tokenization is the next leap forward in crypto and can help break down walls that have advantaged the wealthy and make trading cheaper, more transparent and more accessible for everyday investors."
They LOVE playing this game. "We are doing this so you can now be the whale you always dreamed you would be!" But mean while they cut you to shreds with fees.
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throwaway1777
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richwater
When this whole thing crashes to the ground it will the digital equivalent of tulip bulbs of Netherlands.
liquidise
Tulip mania lasted 3 years: 1634-1637 in part of a single country.
Surely we should keep comparing it to a decades old globalized financial system with formalized state support from many nations and a market cap measurable in the trillions.
SpicyLemonZest
"Market cap" as applied to cryptocurrency is a completely fake metric that exists only because it produces viral big numbers. Cryptocurrencies don't have a market capitalization, because they don't represent fractional ownership of any asset; there's absolutely no reason to think that multiplying the most recent price of 1 ETH by the notional supply of 120 million produces a good estimate of the Ethereum network's aggregate value.
kklisura
I thought the same, but... I don't think it will ever go down. Stock prices are already divested from the company fundamentals, but they can only get so high, so the next _logical_ step would be to create something entirely divested from the stock prices itself. Enter tokenized stock.
tossandthrow
Not really. Some markets are. But when NASDAQ100 trade at PE = 30 I do think it is reasonably discounted cash flow under growth assumptions.
But you can trade EU, FTSE100, EM, etc. at a PE range of 15-20. While this is not historically cheap, it is also ont over-rated.
Fade_Dance
How so? Tokenization is securitized, in this case with equities that have a huge and liquid market (the stock market).
tossandthrow
What?
Why does we risk a crash more by using crypto exchanges over regular exchanges?
This is an incredibly lazy comment and reads like an involuntary spasm.
One thing to note for people who don't have a securities background is that exchanges have offered "depositary receipts" which is essentially the same thing for some time - the innovation here is making the depositary receipt into a crypto token. Depositary receipts are used typically to provide a secondary listing for a stock outside the country of its primary listing. So for example on Nasdaq I can trade a "Vodaphone depositary receipt", which will be denominated in USD but relate to 1 share of Vodaphone, which is listed in GBp in the UK. Somewhere in the pipeline a depositary institution has the actual shares and keeps track of who is the beneficial owner of each share for which a receipt has been issued.
This is an easy way for large companies to generate more liquidity (from foreign investors) and often has tax or other advantages for investors in that they don't need to report an FX pnl- they can just hold the stock in their main currency even though its primary listing is actually in a different currency.
These are usually called ADRs (American Depositary Receipts) and EDRs (European depositary receipts) based on whether the instrument is listed in the US or Europe. So the Vodaphone example above of a UK public company trading a depositary receipt on Nasdaq would be an ADR.
https://www.investopedia.com/terms/d/depositaryreceipt.asp