"Traditional finance views the breakup of its previously consolidated, centralized liquidity as a serious structural threat," Yoon said.
Crypto News
The SEC's proposal to allow third-party listings of tokenized stocks could create two structural risks for financial markets, according to Tiger Research. Director and Head of Research Ryan Yoon identified liquidity fragmentation and revenue fragmentation as the central concerns in a post published on May 22.
Liquidity fragmentation occurs when capital that would otherwise concentrate on a single venue, such as the NYSE or Nasdaq, is dispersed across multiple blockchain platforms and decentralized exchanges. Yoon explained that this dispersion creates price discrepancies between platforms, increases slippage on large orders, and reduces overall market efficiency. "Traditional finance views the breakup of its previously consolidated, centralized liquidity as a serious structural threat," Yoon said.
Revenue fragmentation follows from the same dynamic. As tokenized stocks trade in disaggregated form across different platforms, the transaction revenues that domestic exchanges would otherwise capture instead flow to offshore venues. Yoon said this has direct implications for national financial competitiveness.
Evidence of capital moving on-chain is already visible. Real-world asset open interest on the Hyperliquid decentralized exchange reached an all-time high of $2.6 billion this week. Yoon said the broader shift "poses the deepest strategic dilemma for incumbent financial institutions and regulators alike."
Maja Vujinovic, CEO of digital assets at FG Nexus, also cautioned that tokenized stock markets could split into disconnected liquidity pools. She said that dynamic can create dangerous price tracking errors and shadow-shorting vulnerabilities when there are not enough localized buyers to stabilize a specific token's price.
Supporters of tokenized equities argue they offer tangible advantages. The Blockchain Council has cited faster settlement, fractional ownership, lower transaction costs, and around-the-clock trading as practical benefits. Global accessibility is another factor, allowing non-US investors to gain exposure to US stocks without being limited by local brokerage restrictions.
Brian Vieten, senior research analyst at Siebert Financial, said the SEC's move will accelerate the US financial system's transition from legacy infrastructure to on-chain blockchain-based rails. He added that a portion of the resulting capital flows is expected to benefit high-quality blockchain networks, naming Bitcoin (BTC) and Hyperliquid (HYPE) as examples.
SEC Commissioner Hester Peirce clarified on Thursday that the exemption, if finalized, would be limited to tokens representing the same equity security available in the secondary market today. The full scope of the ruling has not been decided, and details remain subject to change before any official exemption is issued. Tokenized stocks currently account for 4.4% of total real-world asset value tracked on-chain, according to RWA(dot)xyz.
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