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Wall Street races to tokenize the entire stock market

By Telemac

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Wall Street races to tokenize the entire stock market

2026 has become the decisive year for the tokenization of financial assets in the United States. Major Wall Street firms, from historic stock exchanges to investment banks and asset managers, are accelerating their investments in tokenized securities at an unprecedented pace. This trend represents the most profound transformation of American financial market infrastructure since the emergence of electronic clearing houses in the 1990s.

Context

Stock tokenization involves representing traditional shares as digital tokens on a blockchain, enabling continuous trading without interruption due to exchange closing hours. This technological evolution aims to replace 20th-century record-keeping systems with modern digital infrastructure capable of operating 24 hours a day, seven days a week.

For decades, the American stock market has relied on batch processing infrastructure and two-day settlement cycles. This system, known as T+2 settlement, means that share purchases and sales are not finalized until two business days after the transaction date, creating counterparty risks and significant capital requirements for intermediaries.

Tokenization promises to streamline these processes, reduce back-office costs, and provide greater liquidity to both institutional and retail investors. By removing traditional intermediaries such as clearing houses, blockchain theoretically enables near-instantaneous settlement, known as T+0, as well as a drastic reduction in transaction costs.

This trend is part of a broader movement toward blockchain adoption by traditional financial actors, following the success of stablecoins like USDT and USDC, and after the successful launch of tokenized products by institutions such as BlackRock with its BUIDL fund. The cryptocurrency ecosystem has now moved beyond the experimental phase and is attracting massive institutional capital.

The Facts

In May 2026, several major events accelerated the tokenization movement. Bullish, owner of CoinDesk and a major player in the digital assets sector, announced a $4.2 billion investment to acquire Equiniti, a transfer agent responsible for maintaining shareholder records for numerous publicly traded American companies.

This acquisition aims to control the most critical infrastructure layer in the securities value chain: ownership record management. Transfer agents like Equiniti maintain official ownership records for public companies, track share ownership, process stock issuances, handle dividend payments, and coordinate corporate actions such as stock splits.

Tom Farley, CEO of Bullish, stated at a conference that most current tokenized equity products are merely wrappers or IOUs, not true blockchain-native securities. According to him, owning the transfer agent layer enables direct issuance into shareholder records, providing shareholders and executives with unprecedented mutual understanding and issuers with total visibility into trading frequency and holder types.

American publicly traded company chief executive officers regularly complain about receiving very little information on their shareholder composition due to the nested intermediary architecture that has built up in the United States over 200 years. Tokenization could solve this visibility problem by giving issuers direct access to beneficial ownership data.

Meanwhile, the New York Stock Exchange and Nasdaq have both filed regulatory applications to develop tokenization platforms. The NYSE partnered with Securitize, the same partner that manages the tokenization of BlackRock’s BUIDL fund, to build a platform for issuing tokenized stocks and ETFs. This collaboration marks a major turning point for institutional adoption of digital assets and sends a strong signal to the market.

FTSE Russell, a global financial index provider, is already facing the consequences of this shift in the markets. Kristine Mierzwa, head of digital assets at FTSE Russell, raised critical questions at an industry conference: when companies like Galaxy issue shares as tokens, how should these be integrated into full market capitalization calculations? Should these tokenized shares be included in float-adjusted calculations?

The float adjustment problem is particularly complex. Traditional indices use float-adjusted market capitalization, representing shares available for public trading. With tokenized shares, some traditional asset managers cannot directly custody these digital securities. Pension funds, mutual funds, and major institutional investors rely on approved custodians that are not yet configured for natively blockchain assets. This limitation represents a considerable barrier to integrating tokenized shares into major indices.

Cryptocurrency exchange Kraken, through its xStocks program in partnership with Backed, has become the leading provider of tokenized equities with over $25 billion in total transaction volume in less than eight months since launch. This impressive volume demonstrates real market demand for these products and investor appetite for this new asset class.

Meanwhile, Morgan Stanley announced its intention to offer tokenized stock trading through its alternative trading system starting in the second half of 2026, making the investment bank one of the first major American banks to launch in this space and offer this capability to its clients.

Analysis

Wall Street’s interest in tokenization rests on several concrete promises that justify the massive ongoing investments.

Collateral liquidity represents the most powerful argument according to Mark Wendland, CEO of Canton Strategic Holdings, interviewed by CoinDesk. In traditional financial systems, when a trading firm deposits Treasury securities as collateral in the morning, recovering excess collateral takes several days. With blockchain rails, this operation could be completed in a few hours or even minutes, considerably increasing capital efficiency and freeing up significant sums for new investments.

The potential savings are considerable. Tokenization could generate billions of dollars in savings across stock markets, buyback operations, and derivatives markets, thanks to reduced settlement costs, custody fees, and back-office administration charges. Accounting firms like PwC estimate that 2026 will be the year when crypto regulations move from pilot projects to full-scale production deployments globally.

Enriched ownership data represents another major attraction. Issuers would gain unprecedented visibility into their shareholder composition, trading frequency, and the proportion of long-term investors versus short-term holders. This total transparency could strengthen investor confidence, improve issuer-investor dialogue, and potentially reduce the cost of capital for public companies.

The question of maintaining market order remains unresolved however. Traditional markets conduct their price discovery during designated trading hours, while tokenized assets continue to display and trade during weekends and holidays. If an Apple tokenized share trades at a certain price over the weekend but Nasdaq opens sharply lower on Monday morning, it will need to be determined where true price discovery occurred, a complex question that market participants and regulators have not yet satisfactorily answered.

Market Reaction

Market reactions to this evolution are mixed and reflect the structural challenges of integrating tokenization into existing financial systems.

On one side, transaction volumes on tokenized stock platforms are growing rapidly, with xStocks reaching record volumes. Tokenization proponents highlight increased liquidity, cost reduction, and democratized market access for international investors, particularly Asian investors who can thus trade American stocks outside traditional business hours.

On the other side, traditional players remain cautious about integration challenges. Custody banks, which hold assets for pension funds, mutual funds, and major institutional investors, are not yet configured to manage natively blockchain securities. This limitation prevents some large institutional actors from fully participating in the emerging market and taking advantage of the opportunities offered by tokenization.

Kristine Mierzwa from FTSE Russell noted that some index advisory committees are considering excluding tokenized shares from index calculations, as long as traditional custodians cannot directly support them. She nonetheless predicts rapid sector adaptation: « I think we are going to move to a point where every custodian is going to be custodying tokens, it is inevitable. »

Outlook

Several scenarios emerge for the months and years ahead. The central scenario anticipates progressive integration of tokenized shares into traditional financial infrastructure, with pilot programs by major exchanges and investment banks, resulting in coexistence of both systems for several more years.

An accelerated scenario would see mass adoption if major indices agree to include tokenized securities in their capitalization and liquidity calculations, which would trigger a major influx of institutional investments required to replicate the index. A conservative scenario envisions regulatory and technical delays keeping tokenized volumes limited for an extended period.

The main obstacles remain regulatory cooperation between the SEC and various stakeholders, the evolution of custody infrastructure to support digital assets, and the resolution of price discovery problems between blockchain markets and traditional markets. The opportunity window for large-scale adoption ideally sits before midterm elections, when Congress risks slowing financial reforms to focus on electoral issues.

Experts predict that the tokenization of shares could profoundly transform the structure of global financial markets over the next five years, with considerable implications for listed companies, investors, and financial intermediaries. The year 2026 could be remembered as the moment when Wall Street truly embraced blockchain for stock markets, dragging the entire global financial ecosystem in its wake. This transformation is underway right now.

Sources

Telemac
Telemachttp://cryptoinfo.ch

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