Tokenized Stocks Could Reshape Capital Markets

Blockchain might have found its first use case in cryptocurrency, but it has since expanded far beyond that.

Tokenization of assets is now a growing topic as the technology, regulations, and adoption by the public have matured enough. This is true for financial assets like bonds and stocks, as well as real-world assets like real estate or even carbon credits and other ESG assets.

Traditional finance relies on a network of specialized intermediaries, each maintaining separate databases and performing specific functions, all interconnected through intricate operational processes. Tokenization is promising to streamline and simplify this process.

However, as ownership of stocks is progressively shifting from the traditional brokerages to blockchains, many policy questions arise.

A core issue is attributing beneficial ownership and associated investor rights on pseudonymous blockchain networks without compromising user privacy or the usage of decentralized applications.

So two researchers at McMaster University and the Rotman School of Management in Canada are investigating potential solutions in an article published in Research Policy¹, under the title “Tokenized stocks for trading and capital raising”.

Tokenization Explained

What Is Tokenization?

The idea of tokenization is to bring onto the blockchain the recording of ownership and transactions of assets, whether financial or physical assets. Currently, the most popular form of tokenization is focused on tokenization of stocks, as the public knowledgeable about blockchain is also generally investing in companies’ stocks as well.

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One important advantage of tokenization is that it makes the ownership structure a lot more flexible. For example, it can be used for fractional ownership.

Another is that, unlike banking infrastructure and money transfer systems, blockchain operates 24/7 and almost instantaneously. So this can make the market a lot more liquid. It can also let stock trade around the clock every day, something that has been discussed but never implemented in regular stock markets.

This creates a radical difference from traditional stock ownership structures and exchanges. Almost all of them, albeit digitalized, have been conceptualized from the era of paper certificates and in an era when traders still shouted orders across exchange floors.

“Even a straightforward stock trade requires coordination among broker-dealers, trading platforms, custodian banks, clearing agencies, asset depositories, transfer agents, and payment networks, with multiple reconciliation steps throughout the process.”

So in many ways, tokenization is both an ongoing process and the opportunity to rebuild from scratch financial infrastructure, bringing it fully to the digital age.

“A blockchain can consolidate asset creation, servicing, transfer, trading, pledging, borrowing, lending, and essentially any form of financial contracting—including complex derivatives—into a single system.”

How Does Tokenization Work?

There are three distinct pathways for tokenization:

1. A completely new asset can be issued directly on a blockchain.
2. An existing financial asset can be retired and replaced with a newly-issued blockchain-based asset.
3. An asset within the traditional financial system can be deposited with a dedicated custodian who then creates a tokenized claim representing that asset on a blockchain.

In his 2025 “Annual Chairman’s Letter to Investors,” BlackRock CEO Larry Fink highlighted tokenization of existing assets as a powerful way to foster the “democratization of investing.”

The Boston Consulting Group estimates that by 2030, approximately $16 trillion of assets will be tokenized. So this could potentially become very soon a massive business and a radical change to our financial infrastructures.

Identifying Tokenization Issues

Are Tokens Keeping Anonymity?

Most common shares are an investment contract granting rights such as voting at shareholder meetings and receiving dividends, rights that underlie the asset’s value. This is why laws mandate common share issuers to inform shareholders of critical developments and annual meetings.

But by tracking and potentially deanonymizing token holders to fulfill regulatory or contractual obligations, token issuers could inadvertently collect more information about investors than necessary.

This can lead to third parties being able to track all activity of a given account, including investments in competing firms or even private, non-financial activities.

So while tokens can certainly be structured so they keep data safe, the question of managing both transaction data handling and maintaining the normal rights of shareholders needs to be clarified.

Are Tokens Real Ownership?

Many tokenization processes use smart contracts: self-executing computer programs that form the basis of decentralized applications.

Often, formal ownership transfers to the application’s smart contract, making the users only indirect beneficial owners.

This raises a question of counterparty risks, especially as smart contract and token issuers are not insured and regulated as tightly as official brokers.

This can result in unnecessary risks for buyers of tokenized stocks, especially as they might not even realize they are exposed to these risks.

Illegal Transactions

Another issue is that stock ownership is tightly regulated, and controls who can actually buy and sell stocks.

Currently, tokens can be freely transferred to any blockchain address, potentially resulting in ownership by unauthorized entities such as minors, criminals, hostile nations, or politically exposed persons. The anonymity of such transactions only compounds the problem.

At the same time, excessive effort for compliance could lead to recreating almost identically the very infrastructure that tokenization is supposed to simplify and ultimately replace.

For example, verifiers could exploit their position, leading to anti-competitive behavior and a de facto return to a highly-centralized structure.

Solving Tokenization Issues

At first glance, tokenization should be highly appealing as it could eliminate cumbersome paperwork and reconciliation delays.

This, in turn, would free up immobilized capital to be used more efficiently, potentially contributing to economic growth.

One way to deal with anonymity concerns is to adopt a whitelist approach, where only pre-approved addresses and users are authorized to participate in tokenization. This is by far the safest option, but it will also create significant friction, potentially hindering the adoption rate of tokenization.

An alternative is an opt-in registry that incentivizes investors to self-identify to access rights such as dividends and voting, while keeping tokens fully usable across decentralized applications.

At last, another option is decentralized compliance networks such as the Labyrinth Protocol, where, after a user undergoes a KYC process, they can perform any activity in full privacy.

Regarding token ownership risks, the article authors recommend a set of best practices:

• Token registry: issuers should register the token name, address, quantity, date, and other features of tokens that they issue.
• Backed tokens’ number should be registered, and the redemption process outlined, and regulators should establish an oversight framework.
• Issuers should establish a process that defines how they will facilitate relations with their tokenholders with respect to payments (dividends or coupons), votes, splits, and corporate actions.

Solving illegal acquisitions of stock by minors, criminals, or restricted/sanctioned entities is more difficult. The very nature of decentralized blockchain networks means that there are no geographic or jurisdictional restrictions on where applications originate from or run, and from where users operate.

So, even if the largest forms of tokenization can take extra KYC (Know Your Customer) steps to avoid this problem, little can be done inside the current blockchain paradigm to block stock tokenization applications that do not care about this problem.

“Looking forward, realizing the full potential of tokenization will require ongoing innovation and collaboration across multiple disciplines, including finance, law, and technology. ”

Future Of Stock Tokenization

So far, the possibility of blockchain has been either the adoption of blockchain by traditional financial institutions or the partial replacement of these institutions by new blockchain-based protocols.

It is likely that a little bit of both will be the end situation, especially for the tokenization of stocks.

On one hand, it has the potential to democratize investment and reinvent the infrastructure, recording transactions and ownership of stock.

On the other hand, unlike stablecoins, equities confer specific rights like voting and dividends and need to be more regulated. So the necessary guardrails and safety features might make tokenized stock not entirely different from the current brokerage and bank-based system.

Smart regulatory oversight, innovation in technology and protocols, and clearer advantages to the investing public will ultimately determine the eventual success and impact of stock tokenization technology.

Study Referenced

^{1. Malinova, K., & Park, A. (2026). Tokenized stocks for trading and capital raising. Research Policy, Article 105497. https://doi.org/10.1016/j.respol.2026.105497}