TLDR
- SEC’s tokenized stock push may benefit TradFi, but crypto may see limited gains.
- Rob Hadick warns private blockchains could limit value flow to Ethereum.
- Tokenized equities market represents only 2.3% of total real-world assets.
- Financial institutions prefer private chains over general-purpose networks.
As the U.S. Securities and Exchange Commission (SEC) explores the possibility of tokenized equities on blockchain platforms, the potential benefits for the crypto industry remain uncertain. Rob Hadick, a general partner at crypto venture firm Dragonfly, warned that while tokenized stocks may greatly benefit traditional finance, they might not offer the expected advantages for the broader crypto ecosystem. Hadick’s views challenge the optimism seen by some figures in the industry about Ethereum’s role in the process.
Uncertainty Over Tokenized Equities in Crypto
Hadick raised concerns about the future of tokenized stocks, explaining that their adoption could largely benefit traditional finance (TradFi) by enabling 24/7 trading. “There’s no doubt it has a big effect on TradFi,” he said during an interview at the TOKEN 2049 conference in Singapore. He pointed out that the crypto industry might not see the same benefits from the growing trend of tokenized assets.
The SEC’s interest in allowing tokenized stocks to trade on crypto exchanges is part of a broader movement to modernize financial markets. However, Hadick noted that financial institutions, such as Robinhood and Stripe, are opting to build their own blockchains.
These companies want to control factors like privacy, validator sets, and block space. Hadick explained that institutions might prefer private blockchains instead of utilizing general-purpose networks like Ethereum, where these control aspects are more limited.
Institutions Prefer Control Over General-Purpose Chains
Hadick suggested that institutions would likely favor private blockchains rather than using public ones like Ethereum. “They don’t want to share the economics. They don’t want to share block space with memecoins,” he explained.
According to Hadick, institutions want full control over their environments, including aspects like privacy and validator selection. This preference for private chains is partly due to the desire to avoid potential complications that could arise from using general-purpose chains.
Although some financial institutions are exploring Ethereum and other general-purpose networks, Hadick believes these platforms may not be the ideal choice. He also expressed concerns about the use of layer-2 networks, warning that they could cause “leakage” of value, which would limit the flow of capital into the broader crypto ecosystem.
Instead of contributing to the development of decentralized platforms, institutions may build their own controlled ecosystems, potentially stalling the growth of the crypto space.
Tokenized Equities Represent a Small Market Share
The market for tokenized equities is still in its infancy, representing only 2.3% of the real-world asset tokenization market. According to RWA.xyz, the total market value of tokenized stocks is around $735 million. Despite the growing interest from major financial institutions, the sector remains small compared to traditional financial markets.
In recent months, organizations like Nasdaq, VanEck, and the New York Stock Exchange (NYSE) have engaged with the SEC to discuss how tokenized equities could be listed and traded. The SEC has shown interest in facilitating these innovations, but Hadick questioned whether this move would genuinely benefit the broader crypto ecosystem. While traditional finance might benefit from tokenized stocks’ ability to trade 24/7, the crypto industry’s direct involvement remains uncertain.
The Future of Tokenized Equities and Crypto
Hadick’s perspective stands in contrast to the optimism shared by industry leaders like Tom Lee of Fundstrat, Jan van Eck of VanEck, and Joseph Lubin of Consensys. These figures have suggested that Wall Street’s move toward blockchain-based equities could be a major win for Ethereum and the broader crypto ecosystem. However, Hadick remains cautious, focusing on the risks of value leakage and the likelihood that financial institutions will prefer private blockchains.
While the SEC’s ongoing discussions with financial institutions signal potential growth in the tokenized equities sector, the full impact on the crypto market remains unclear. Hadick’s comments underline the need for further consideration of how these developments will affect both traditional finance and the evolving crypto industry.
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