Wall Street pushes tokenized stocks, but institutions aren’t eager to trade them

Wall Street firms like ICE and Nasdaq are actively pursuing the tokenization of stocks, aiming to modernize market infrastructure and enable 24/7 trading. Tokenization involves representing traditional assets on blockchain networks, potentially allowing for instant settlement. However, institutional investors express concerns about the implications of instant settlement, particularly regarding liquidity and financing. The current T+1 settlement system allows for position netting and funding management, which would be disrupted by instant settlement, potentially increasing costs and reducing liquidity, especially during peak trading times. While retail traders may readily adopt tokenized markets due to benefits like direct digital wallet access and extended trading hours, institutions may follow only if significant liquidity shifts to these venues. Risks include market fragmentation if multiple tokenized versions of the same stock emerge, creating confusion about ownership and potentially weakening price discovery. Despite these concerns, the industry is progressing, with exchanges exploring extended trading hours and tokenization as a means of modernization, though adoption may initially be faster among retail investors.

(Source：CoinDesk)