Bloomberg Analyst: Tokenized Stocks Unlikely to Disrupt ETFs
Bloomberg senior ETF analyst Eric Balchunas believes that tokenized stocks are not likely to pose a significant threat to exchange-traded funds. The SEC is considering a rule change that could potentially bring shares of companies like Tesla and Nvidia onto crypto exchanges.
According to Balchunas, the potential shift is more about providing convenience for digital asset investors rather than disrupting traditional markets. He compared it to how ETFs allowed retail investors to access cryptocurrencies in a familiar manner.
While tokenized stocks would offer crypto-native traders access to conventional equities in a format they prefer, Balchunas does not foresee them significantly impacting ETF market share. He stated on social media:
“This is just allowing crypto natives to buy regular person investments in a format they prefer. Only this side of the equation has way more money, which is why tokens likely won’t dent ETF market share much.”
The potential regulatory change highlights the intersection of Wall Street and blockchain technology that U.S. regulators are beginning to explore. Tokenized equities would represent traditional shares on-chain, providing benefits such as near-instant settlement, fractional trading, and global accessibility.
Tokenization has gained momentum globally, with banks and financial infrastructure providers testing blockchain-based trading and settlement systems. UBS and JPMorgan have introduced tokenized bond and fund offerings, while regulatory sandboxes in Hong Kong and Singapore are testing tokenized securities platforms. Deutsche Börse in Europe has made progress in digital bond issuance and settlement using DLT technology.
Proponents of tokenization argue that it could modernize capital markets by reducing intermediaries, lowering costs, and expanding investor access. However, concerns about custody, compliance, and investor protection remain among critics.
In the U.S., regulators have historically been cautious about adopting new technologies to ensure financial stability and market integrity. If approved, tokenized stocks on crypto exchanges would mark a significant step by the SEC in bridging traditional securities with blockchain-based trading venues. However, the details of such a program are still unclear, and the commission has not issued a formal statement.
