Tokenization: Who Wins as Securities Move On-Chain?
From Experiment to Market Structure
Tokenized securities are moving from pilot to production. Equities, ETFs, and commodity exposures are increasingly issued and represented on-chain, reshaping how securities are issued, traded, and settled. The appeal of tokenization is now well understood: assets become programmable, ownership can be fractionalized, settlement shortens from days to near-instant, collateral becomes composable, and trading is no longer constrained by geography or market hours.
What is changing is not the potential of tokenization, but how it reshapes market structure, and the competitive dynamics this creates.
As securities move on-chain, the traditional separation between issuance, clearing, settlement, custody, and trading begins to converge. Functions that once required multiple intermediaries increasingly fold into integrated workflows.
The central question is no longer whether securities move on-chain, but who controls the end-to-end infrastructure that investors actually use.
Vertical Integration Is the Real Disruption
In traditional markets, the securities lifecycle is fragmented. Issuance, clearing, settlement, custody, and financing are handled by specialized institutions.
On-chain, these layers compress:
Clearing and settlement converge on the ledger
Transfer agency logic moves into smart contracts
Custody becomes wallet infrastructure and key management
Compliance and eligibility are enforced at the protocol or platform level
As a result, value shifts away from intermediaries that manage handoffs and toward platforms that own the full workflow. The strategic contest is no longer about who issues tokens, but about who integrates issuance, custody, compliance, trading, and liquidity into a coherent system.
Three Archetypes in Motion
This compression reshapes the competitive landscape and explains why different archetypes are converging on tokenized securities from very different starting points.
Crypto-Native Players: Distribution and Liquidity First
Crypto-native players begin with distribution. Exchanges and on-chain platforms aggregate millions of investors globally, operate 24/7, and have proven playbooks for onboarding, wallet management, and continuous liquidity. These players are increasingly extending into tokenized securities, offering tokenized equities and ETFs to eligible investors alongside commodity exposures that trade continuously. For these players, tokenized securities are a new instrument that plug directly into existing capital flows.
Infrastructure providers support this expansion with proof-of-reserves, oracle networks, and cross-chain interoperability that help synchronize fragmented venues. The crypto-native advantage is clear: liquidity and engagement already exist, and tokenized securities can immediately be used as collateral, traded against stablecoins, and integrated into on-chain markets.
Product innovation further reinforces crypto-native players’ edge. Perpetual futures (perps) are a prime example. Crypto pioneered equity perps as non-expiring instruments that use funding mechanisms to anchor prices to a reference index. In the context of tokenized equities, perps offer a complementary layer: they provide continuous exposure and hedging when underlying spot markets are closed, help manage weekend and overnight risk, and contribute to price discovery while spot liquidity matures.
The adoption of perps is not only driven by continuous exposure and hedging, but by capital efficiency. Quoting and making markets in tokens is capital-intensive, requiring inventory to be pre-funded across multiple crypto platforms and on-chain venues. Perpetuals, by contrast, allow exposure and liquidity provision without fully pre-funding the underlying asset, materially lowering capital requirements.
For a deeper dive, see our equity perpetuals primer: https://flowtraders.substack.com/p/equity-perpetuals-part-1-the-infrastructure
Traditional Finance Players: Defending Distribution as Markets Move On-Chain
Traditional finance (or TradFi) is not standing still. Market operators such as DTCC, NASDAQ, and NYSE have articulated paths toward tokenized securities, with DTCC now actively integrating tokenization infrastructure through partnerships such as its work with the Canton Network to bring tokenized assets (starting with U.S. Treasuries) into regulated on-chain workflows.
In particular, blockchain rails are already being used for meaningful institutional activity: Broadridge’s repo platform running on Canton processes hundreds of billions in daily U.S. Treasury repo volume, illustrating that tokenized financing workflows are moving beyond pilots and into real market usage.
The TradFi advantage lies in trust and scale. Existing brokerage, custody, and reporting workflows already handle corporate actions, regulatory reporting, and compliance at scale. As traditional players increasingly enter the space, tokenized securities are likely to be added alongside conventional listings rather than replacing them outright.
The shift is evolutionary rather than revolutionary, but the direction is unmistakable. Faster settlement and extended trading access are becoming baseline expectations. Traditional institutions are moving on-chain not to reinvent markets, but to retain distribution and client ownership as investor behavior shifts toward continuous access.
Hybrid Players: High Reward, High Execution Risk
Between crypto-native players and traditional institutions, a new class of full-stack platforms aims to integrate issuance, transfer agency, custody, compliance, and secondary trading into unified on-chain workflows. These platforms often operate across permissioned networks and regulated venues, with privacy and interoperability as core design principles.
The bet is straightforward: adoption accelerates when tokenized securities trade inside accounts investors already use, rather than requiring entirely new workflows. On the retail side, expectations are already shifting. Robinhood’s 24-Hour Market for selected stocks and ETFs reflects growing demand for continuous access to familiar instruments.
But full-stack models are capital-intensive and operationally complex. They win only if they reach scale and become default rails. If they do not, they risk becoming infrastructure providers to whoever ultimately controls distribution.
Tokenized Securities: Models That Matter
Tokenized securities may share common rails, but structure determines outcomes:
Native Issuance: Issuer-sponsored tokenization occurs when a company records its official shareholder registry, either in part or in full, directly on a blockchain. These securities retain all the obligations associated with traditional securities. Investor rights, transfer restrictions, and corporate actions are embedded directly at the token level, with legal equivalence to traditional share ownership. This model offers cleaner alignment between on-chain representation and shareholder rights but requires issuer participation and regulatory clarity across jurisdictions.
Third Party Tokenization: Wrapped or custodial models involve traditional securities held in custody by an unaffiliated party, with tokens minted and burned against underlying inventory. Eligibility rules and transfer constraints are enforced at the wrapper level. These structures can scale faster and distribute across multiple venues, but they introduce additional custody, trustee, and redemption layers that investors must diligence.
In both cases, issuance is not the bottleneck. Regulatory clarity, distribution, and secondary liquidity determine whether these products become markets.
A Thought Experiment: Permissionless Issuance
Consider a scenario where securities are issued directly onto permissionless rails.
In such a model:
Issuers (or their agents) mint securities directly to on-chain registries
Atomic or near-atomic delivery-versus-payment (DvP) occurs using stablecoins or any other form of on-chain cash
Investors hold assets via wallets or regulated custodians
Settlement becomes continuous
Crucially, there is no native equivalent of a prime broker in today’s crypto markets, and that absence is precisely why a direct port of traditional equity market structure is not feasible. In equities, prime brokers warehouse inventory, and absorb the capital burden of quoting across thousands of tickers. On-chain markets cannot replicate this model without prohibitive capital requirements due to the need for pre-funding.
This reality challenges traditional assumptions. Institutions can preserve trust and compliance, but they cannot recreate legacy plumbing on-chain without friction. Control over settlement and liquidity increasingly matters more than control over listing venues.
Market Structure Realities: What Winners Must Deliver
Despite rapid progress, we are not yet at the stage described above. Liquidity is split across public blockchains, permissioned networks, centralized platforms, and decentralized venues. Secondary markets are often thin, and price discovery can be uneven, particularly outside traditional hours and across regions.
In this environment, issuance alone is not enough. The decisive layer is market structure and liquidity.
The winners will be those who can:
Aggregate liquidity across rails, rather than operating in isolated silos
Enable cross-venue access, connecting centralized and decentralized liquidity pools
Anchor prices to trusted references, keeping markets aligned across spot, derivatives, and official closes
Deliver continuous execution across time zones, geographies, and market conditions
So, who wins as securities move on-chain? The answer is not a single institution or category, but a profile. Winners will be players that combine distribution, trust, and liquidity into an integrated workflow.
Distribution is the Moat - 24/7 is the Baseline
Tokenized securities are not bound by exchange hours. Continuous trading unlocks global participation and faster settlement, but it also introduces new market-structure challenges.
Liquidity must persist through macro events, corporate actions, and outside traditional market windows. Prices must remain anchored to official closes and listed derivatives. Without aggregation, fragmentation is inevitable.
Crypto-native players already operate in this environment. Traditional players will follow, embedding tokenized securities alongside conventional instruments rather than in parallel silos.
Looking Ahead
Over the next 12 to 24 months, wrapped models are likely to scale first where eligibility allows, while native issuance accelerates as regulatory clarity improves.
Distribution battles will intensify as crypto venues and traditional brokers converge on 24/7 access as the baseline. The rails are real. Incentives are aligned. What determines the success of tokenized securities is not more proof of concepts, but trusted distribution, integrated workflows, and around-the-clock liquidity.
Our Role as a Market Maker
Liquidity is what turns tokenized securities from promising products into functional markets. With over two decades in traditional markets and nearly a decade in digital assets, we provide continuous, two-sided liquidity in tokenized equities, ETFs, and commodities where regulations permit.
Flow Traders’ OTC layer aggregates liquidity across public blockchains, permissioned networks, centralized venues, and decentralized pools - supporting consistent execution across time zones and market hours.
Reliable liquidity is not a feature; it is the foundation.
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