Tokenized Equities and the Stablecoin Playbook
A comparison between the rise of stablecoins and today’s tokenized securities—and what it will take to move from wrappers to true capital market infrastructure.
Disclaimer : This is a personal post. Views expressed in this article are my own and do not represent those of my employer.
Introduction
In 2017 and 2018, stablecoins were still a curiosity : a concept that promised to merge off-chain value with on-chain usability. Few at the time expected that the most impactful product of crypto’s second decade would be a dollar, issued by a corporation, custodied in banks, and redeemed through an intermediary.
Redemption paths were obscure, banking access was uncertain, and price stability often broke down during periods of market stress.
Tokenized equities today feel remarkably similar. Just as early stablecoins tried to turn fiat into programmable money, tokenized stocks aim to transform legacy equities into portable, composable on-chain assets. Both reflect an ambition to bring real-world value into crypto-native environments—without waiting for the real world to catch up.
They promise a bridge between traditional capital markets and the blockchain-native world. They offer a familiar asset format—Apple, Tesla, the S&P 500—but with crypto affordances: 24/7 access, composability, fractional ownership, and global portability. Like early centralized stablecoins, they rely on off-chain infrastructure to collateralize the on-chain asset, and like early stablecoins, their appeal is strongest where legacy systems fail : emerging markets, unbanked populations, and high-friction financial environments.
But the parallels go deeper than surface ambition. They share the same architecture:
Centralized issuance
Off-chain collateral
Redemption through gated compliance
Fragile market structure
I’ve seen this structural mismatch before, in the early days of stablecoins, when infrastructure was still catching up with vision. Tokenized equities are walking the same path, with some of the same blind spots. They inherit not only the aspiration of financial interoperability but also :
The regulatory ambiguity
The liquidity mismatches
The fragmented standards
The lessons from the rise of stablecoins offer a blueprint—but also a warning—for what comes next in the tokenized equity space.
1. From Wrappers to Railways
In the early days of stablecoins, most people underestimated how transformative a tokenized dollar would become. USDT and early fiat-backed tokens were clunky: centralized issuers, off-chain reserves, redemption limited to select parties. But they served a clear purpose—moving off-chain value across crypto-native systems, 24/7.
Tokenized equities today function in almost the exact same way:
A Special Purpose Vehicle (SPV) in a permissive jurisdiction holds the real-world shares (e.g., Apple, Tesla).
Tokenization occurs under regulatory frameworks like Liechtenstein’s TVTG or other digital asset laws.
Users mint tokens via a KYC-gated gateway, redeemable for the cash value of the stock.
Tokens can move freely onchain, be traded on DEXs, and theoretically be used as DeFi collateral.
Just like early stablecoins, tokenized equities aren’t yet part of the “core stack”: they’re wrappers sitting on the edge of traditional systems. But they promise portability, composability, and global access. What stablecoins did for the dollar, these tokens hope to do for capital markets.
But the lesson from stablecoins is this: it’s not the asset that transforms the system—it’s the infrastructure built around it. Only when faster redemption, deeper liquidity, and institutional interfaces emerged did stablecoins become indispensable.
2. Liquidity Without Infrastructure
Stablecoins went through multiple depeging events before market mechanisms—arbitrage, transparency, liquidity depth—caught up. Their growth was powered by demand, but stabilized by infrastructure.
Tokenized equities are still in the demand phase, with very little infrastructure in place.
First, these products operate in a split-market model: the underlying equity trades during traditional market hours (9:30am–4pm ET in the U.S.), while the token trades 24/7. Market makers, who are essential for token liquidity, can only hedge during equity market hours. That means they’re flying blind on weekends and after-hours, forced to widen spreads or exit altogether—leaving the market illiquid and vulnerable to manipulation.
Second, the redemption mechanism is slow and frictional. You don’t redeem the stock—you redeem its cash value, minus fees (often 25 bps), and only during market hours. If you buy tokenized Apple on Sunday night and it gaps down Monday morning, you eat the loss. That price dislocation risk falls disproportionately on retail, especially in speculative or stress-driven trading conditions.
Finally, these products face an even greater threat than stablecoins did: fragmented liquidity. There’s no single “canonical” tokenized Apple. Instead, multiple issuers wrap the same stock, each under different terms, redemption frameworks, and jurisdictions. The result is a fractured market with no unified order book, impaired price discovery, and capital inefficiency for both market makers and DeFi protocols.
This is a structural problem. In traditional markets, equity trading relies on synchronized settlement, shared clearing rails, and risk models.
3. Regulation and the Geopolitical Gap
Stablecoins operated for years in a regulatory gray zone : outside banking regulation, but tolerated because they filled a global demand for dollar access. That regulatory window is narrowing, with the EU’s MiCA framework coming into effect in 2024 and the U.S. poised to follow with the GENIUS Act in 2025.
Tokenized securities never got a grace period. Because they mirror regulated assets, they immediately trigger securities laws. This is why nearly all tokenized equity platforms are built offshore, often in Liechtenstein, Jersey, or Switzerland. These jurisdictions allow them to operate within digital asset frameworks, but the tokens are largely geofenced away from U.S. users—despite representing U.S. companies.
This creates a geopolitical irony: U.S. equities may end up more accessible to emerging market users through European tokenized wrappers than to U.S. investors themselves.
Europe appears better positioned here. With frameworks like MiCA, jurisdictions like Liechtenstein and Switzerland have clearer paths for RWA tokenization, including equities. That regulatory clarity could make the EU the natural home for early experimentation. Meanwhile, U.S.-based innovators are handcuffed—unless they build entirely offshore, with a firewall between themselves and domestic users.
Final Thoughts
The history of stablecoins shows us what’s possible: real-world assets can be made portable, usable, and composable on-chain. But it also shows us how long it takes, and how fragile things are until real infrastructure catches up.
Stablecoins scaled when they became not just assets, but infrastructure. If tokenized securities are to follow a similar arc to stablecoins, they will need to evolve along several key dimensions:
Redemption Efficiency
Just as stablecoins improved redemption speed and access, tokenized securities must reduce friction. Instant settlement and T+0 redemptions are essential for arbitrage and trust.
Canonical Standard
A functioning market cannot operate with five different versions of the same stock. Liquidity will not concentrate unless the industry coalesces around shared standards—both in terms of token structure (metadata, legal rights, and redemption logic) and smart contract behavior.
Compliant Composability
For tokenized equities to participate meaningfully in on-chain finance, DeFi infrastructure must evolve to support their use in a legally robust manner. This likely means permissioned smart contracts, identity-gated collateral pools, or modular compliance layers that preserve composability without sacrificing regulatory alignment.
Market Infrastructure
The liquidity constraints of tokenized equities are structural, not incidental. Bridging the gap between market hours and 24/7 trading will require an ecosystem of tools: market-making platforms with synthetic hedging capabilities, real-time clearing rails, collateral-efficient wrappers, and eventually, regulated intermediaries capable of balancing both sides of the market across time zones.
Jurisdictional Alignment
For tokenized securities to move beyond wrappers into full-stack financial primitives, they must be recognized within the core issuance and governance processes of capital markets. That means dividends, voting rights, splits, and even IPOs will need to be designed for natively digital environments. This will only be possible with a regulatory architecture that acknowledges how capital formation and distribution are changing in real time.
Just as early stablecoins paved the way for more robust systems (like Circle’s treasury integrations or real-world FX stablecoins), today’s tokenized stocks will be surpassed by native on-chain issuances, composable ETFs, and programmable corporate governance. But for those building long-term, the real work starts here.