The worlds of cryptocurrency and traditional finance are entering a new phase in the ongoing debate over the digital transformation of securities through tokenization. By bringing assets like stocks and bonds onto blockchain infrastructure that operates around the clock, tokenization promises continuously open markets, greater transparency, and improved cost efficiency. Advocates argue this approach enables investors to trade more rapidly and flexibly while offering companies key transparency and data advantages.
Bullish’s $4.2B acquisition of Equiniti
Last week, Bullish, the crypto exchange that also owns CoinDesk, made waves by announcing a deal to acquire transfer agent Equiniti for $4.2 billion. Equiniti plays a vital but often overlooked role, managing shareholder records, handling stock trades, overseeing dividend payments, and facilitating corporate actions for publicly listed companies.
At the company’s earnings meeting, Bullish CEO Tom Farley emphasized that most products currently marketed as tokenized assets are simply digital IOUs representing traditional shares. Farley argued that by owning a transfer agent outright, it becomes possible to record tokenized shares directly in corporate ledgers, bridging the gap between digital assets and regulated company records.
“One of the biggest challenges for companies in managing investor relations is that, due to the current infrastructure, they know very little about their own shareholders. Tokenization can bring a big leap in transparency and information flow here,” Tom Farley said.
Thanks to real-time tracking of tokenized shares, companies can see who owns their stock and for how long, while investors could enjoy after-hours and weekend trading beyond limited traditional market hours.
Index calculation and liquidity challenges
As tokenization becomes more widespread, major index providers and asset managers face new complexities. Kristine Mierzwa, head of digital assets at FTSE Russell, highlighted serious questions about how tokenized equities might impact criteria including market capitalization, liquidity, and index inclusion. While index calculations typically rely on market value and free float, a scenario where a company’s shares trade both on conventional exchanges and as blockchain-based tokens could complicate these metrics.
“Large asset managers may not want to include tokenized shares in their index calculations if they cannot independently custody these tokens. But this may shift quickly, as major financial institutions are rapidly moving ahead with blockchain projects,” Kristine Mierzwa noted.
In recent months, industry giants such as BlackRock, Franklin Templeton, and Apollo have launched tokenized fund products, directly entering the field. Platforms such as Robinhood and Kraken have also explored tokenized equities, while Coinbase-backed initiatives focus on making real-time money settlement using stablecoins and blockchains more common.
Real-time settlement and pricing dilemmas
The 24/7 tradeability of tokenized assets brings a new set of pricing challenges, deviating from established closing hours of traditional markets. For example, if Apple shares continue trading on the blockchain over the weekend, discrepancies can arise between the blockchain price and the official Nasdaq opening price on Monday. Mierzwa warned these price discrepancies could complicate price discovery and force exchanges and index providers to develop new methodologies.
The presence of several token variants for the same stock could further fragment prices and liquidity, forming a dual-track market. Some tokens may offer dividend rights, while others grant only exposure to price changes, increasing uncertainty for index providers over which token should set the standard.
Due to regulatory and security concerns, traditional banks and large financial institutions are opting for “walled garden” or closed blockchain networks rather than connecting directly to public networks. This hybrid approach seeks to balance innovation with compliance and risk management requirements.
Looking ahead, Kristine Mierzwa anticipates significantly more interoperability and integration between large financial institutions and crypto firms within the next two to three years.
