Crypto's Audacious Bid to Rebuild the Stock Market

First, they came for the currency market. Then, the money market. Now, crypto's big disruptors are targeting the multi-trillion-dollar heart of global capitalism: the stock market.

- Bloomberg

Dismissed as a fringe fantasy years ago after a regulatory backlash and the collapse of early projects, the first attempts by the digital-asset industry to put shares on the blockchain fizzled out. This time, a new cohort of players—from crypto giants Coinbase Global Inc. and Kraken to retail favorite Robinhood Markets Inc.—is making a fresh run at rewiring the very plumbing that governs equities around the world.

The ambition is predictably audacious from a crypto community built to gut out the middlemen and outsmart the regulator. The promise: a financial system where trading Apple Inc. or Tesla Inc. stock is as fast and easy as sending a text message. No more extended settlement periods. Just instant, cross-border transactions, around the clock, five, or even seven, days a week.

But beneath the braggadocio lies profound challenges that threaten this tokenization effort, or the process of creating digital representations of real-world assets on a decentralized network. The effort runs straight into custody and counterparty risk: each token is typically backed by a real-world share that must be funded and held in custody. Stock investing also involves a complex web of legal protections, ownership structures, and corporate actions deeply embedded in centralized, regulated systems. This world of complexity makes tokenizing stocks a world away from the likes of digital art.

"You are changing the way things are trading," said Bryan Routledge, an associate professor of finance at Carnegie Mellon University's Tepper School of Business. "You're not just changing the format of an asset."