Coinbase, Kraken, Robinhood Revive Push for Stock Market on Blockchain

Crypto companies are again attempting to bring traditional equities onto the blockchain. Bloomberg’s June 27 report highlights moves by Coinbase, Kraken, Robinhood, Ondo Finance, and Dinari to offer tokenized shares. Kraken’s Bermuda unit plans to begin trading tokenized stocks by late June. Robinhood is working on a similar rollout for the European market. Securitize, which previously digitized a BlackRock fund, is now helping traditional firms shift equities on-chain. “We are talking to many different asset issuers,” said Michael Sonnenshein, chief operating officer at Securitize.

Past Attempts Struggled with Regulation and Market Structure

Earlier efforts to launch a blockchain-based stock market faced significant obstacles from regulators and technical complexities. The process of stock tokenization, while technologically possible, runs into practical concerns. Legal ownership, custody, and corporate governance structures often don’t align with blockchain-based systems. Bryan Routledge, a finance professor at Carnegie Mellon University, said, “You are changing the way things are trading.” He emphasized that tokenization doesn’t just alter the format but the entire trading mechanism. This structural shift complicates integration with existing financial systems and laws, especially in regulated markets like the U.S.

How Tokenized Stocks Function Under Different Models

These products are designed to improve trading by removing intermediaries and speeding up settlement times. In secure models, tokens represent real shares held by regulated custodians and are stored in digital wallets. These setups treat tokens as verifiable claims on physical shares. In weaker models, tokens function more like IOUs and depend on the issuer’s credibility. Without strong oversight, there is a risk that the token’s value won’t match the actual stock. These variations in model strength raise investor concerns about reliability and legal protection across different offerings.

Firms are proceeding cautiously, especially in regions lacking regulatory clarity. Galaxy Digital is reportedly considering tokenizing its own stock and has spoken with regulators. “I expect to see tokenized equities for crypto and non-crypto,” said CEO Michael Novogratz. Meanwhile, the DTCC, which processes most U.S. stock trades, is planning a limited pilot. Nadine Chakar, head of DTCC Digital Assets, explained, “We have no desire to do this in a big bang.” This cautious stance suggests that major institutions are not yet ready to embrace full-scale stock tokenization efforts.

Tokenized Equity Market Still Very Small in Scale

The current market size for tokenized stocks is very small compared to traditional equities. RWA.xyz values the tokenized equity market at $388 million, versus over $120 trillion globally. Most of this comes from Exodus Movement Inc., which tokenized its shares in 2021 using Securitize. These shares now represent 78% of the tokenized market. Past failures like Terra’s Mirror Protocol still impact investor confidence. That project ended under SEC investigation and contributed to $40 billion in crypto-related losses. These past issues make many cautious about engaging with new tokenized stock offerings.

Some U.S. regulators are exploring safer ways to test blockchain-based equity trading within sandbox environments. SEC Commissioner Hester Peirce has voiced support for such test zones. “They do not have to comply with inapt regulations,” she said in a May 8 speech. She added that many financial rules were created long before blockchain technology existed. These sandbox structures aim to balance innovation and consumer protection by limiting exposure while testing new systems. It remains to be seen whether these zones will produce workable models for long-term adoption.

Global Demand Depends on Local Market Conditions

Interest in tokenized stocks varies depending on the stability of local financial systems. According to Wyatt Lonergan of VanEck Ventures, “Crypto-native investors… want the comfort of, say, Apple stock.” This demand increases during times of crypto market uncertainty. Bryan Routledge noted, “It was this analog of tokenization that really lit the fuse.” But it’s unclear whether this momentum will shift over to traditional stock markets.