Tokenized equities will be a big benefit to traditional markets, but may not be a boon for the crypto industry that others have predicted, says Rob Hadick, general partner at crypto venture firm Dragonfly.
“There’s no doubt it has a big effect on TradFi,” Hadick told Cointelegraph at the TOKEN 2049 conference in Singapore. “They want 24/7 trading, it’s better for their economics.”
However, he saw unclear benefits for major crypto players in the real‑world asset tokenization space, such as Ethereum.
The US Securities and Exchange Commission is reportedly developing a plan to allow blockchain versions of stocks to trade on crypto exchanges after many financial institutions pushed the regulator to allow for always‑open markets.
Hadick said that the institutions “don’t want to be directly on these general‑purpose chains,” giving Robinhood and Stripe as examples of those building their own blockchains.
“They don’t want to share the economics. They don’t want to share block space with memecoins. They want to be able to control things like privacy [and] who the validator set is, they want to be able to control what is happening in their execution environment.”
Institutions want their own control
Hadick said that if tokenized stocks use layer‑2 networks, it creates “leakage” as value may not flow back to Ethereum or the broader crypto ecosystem as much as hoped.
If financial institutions build their own layer‑1 blockchains, it would become a “little less clear” how value would flow into the rest of the crypto ecosystem.
Several private permissioned blockchains were launched and failed in previous years, but hybrid chains, where the company has its own control but the option to be permissionless, are where most institutions are at the moment, he said.
“They want their own L1s and L2s, but they want an environment that they control.”
Hadick’s outlook is contrary to the current narrative spearheaded by the likes of Fundstrat’s Tom Lee, VanEck CEO Jan van Eck, and ConsenSys founder Joseph Lubin, who think that Wall Street and TradFi moving on‑chain will have massive benefits for Ethereum, which could help to lift the wider market.
SEC pushes forward on tokenized equities
A number of fund issuers and exchanges, such as VanEck and the New York Stock Exchange (NYSE), have recently met with the SEC to discuss tokenized equities.
Related: SEC weighs plan to allow blockchain‑based stock trading amid crypto push: Report
In September, the Nasdaq filed for a rule change to allow it to list and trade tokenized stocks.
Tokenized stocks are a nascent sector, representing a tiny 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.