Wall Street Tokenization Explained: Will Blockchain Replace Today's Stock Trading Stack?

The U.S. Securities and Exchange Commission issued an order on September 17 allowing blockchain-based venues to trade tokenized versions of listed U.S. stocks without registering as traditional exchanges. This regulatory relief, which expires in five years, mandates that each token must retain the same rights as the underlying traditional share while imposing caps on trading volume and symbols. Industry experts Nick Cherney of Janus Henderson and Gabor Gurbacs of Openassets suggest this move could eventually replace significant portions of Wall Street's legacy trading infrastructure. By streamlining the current process, which often involves up to nine intermediaries, tokenization aims to reduce costs and improve settlement efficiency. Despite the potential for innovation, experts note that the current user experience for investors will likely remain largely unchanged in the near term. While Janus Henderson has seen institutional interest in offshore tokenized funds reaching up to $1 billion, this remains a fraction of the $24 trillion global ETF market. Ultimately, the transition is viewed as an inevitability that will likely unfold in stages as the industry tests the limits of this new regulatory framework.