Tokenised stocks bring limited benefits and high risks
Blockchain trading of tokenised stocks could allow 24/7 transactions, but legal protections are unclear and investor safeguards may be lost.
The cryptocurrency sector has promoted tokenised stocks, allowing shares to be traded via blockchain. While fractional ownership and 24/7 trading are possible, most brokers already offer commission-free fractional shares, limiting the benefits for individual investors.
Tokenised stocks require a custodian to hold the underlying asset, a digital token representing the share, and smart contracts granting rights such as dividends and voting. Platforms like Kraken and Robinhood now offer tokenised trading, while asset managers like BlackRock explore tokenised funds.
Proponents cite transparency, security, and direct access to companies as advantages.
Risks remain significant. Transactions may be irrevocable, and uncertain legal protections, and smart contracts cannot cover all scenarios. Experts warn that tokenisation may bypass securities laws, risking market trust and investor protections.
Many analysts suggest the crypto industry’s push for tokenisation is driven more by a desire to integrate with traditional finance and attract institutional capital than by benefits to retail investors. Advantages are limited while risks, including regulatory uncertainty and potential fraud, are substantial.
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