What are "tokenized stocks"?

Investment Analysis Clubs Macro Economic Trends and Risks
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Every time I think I have heard everything about the markets something new pops up. What are “tokenized stocks”?

https://www.wsj.com/finance/stocks/tokenized-stocks-are-coming-to-a-market-near-you-five-things-to-know-d9131494?mod=finance_lead_story

Tokenized Stocks Are Coming to a Market Near You: Five Things to Know

Big U.S. exchanges are working on plans to offer digital tokens that mimic shares and trade 24/7

By Vicky Ge Huang, The Wall Street Journal, March 9, 2026

Wall Street firms are in a race to transform stocks and other traditional assets into digital tokens using the technology that underpins bitcoin and other cryptocurrencies. …

In their current form, tokenized stocks are digital tokens that represent shares of publicly traded companies on the blockchain. By design, each token is equivalent to a single share of stock.

Most of the tokens trading today are technically derivatives and not stocks, at least at the moment, and thus don’t confer the holder all of the rights of ownership that shares provide—even if they track those shares’ prices. In the future, though, tokens are expected to grant those rights, including dividend payouts and the ability to vote on shareholder proposals. For example, the exchange operator Nasdaq is working on a plan to make tokenized stocks the official digital version of the stocks themselves…

Tokenized stocks are gaining popularity because blockchain technology allows them to be traded 24/7, a feature already familiar to crypto investors but previously impossible in traditional markets. Tokenization also makes expensive blue-chip stocks accessible through fractional ownership, allowing anyone to buy a small digital slice of a company for just a few dollars. …

Some digital tokens tracking popular U.S. stocks have deviated wildly from underlying prices. This is primarily because many tokenized stocks are thinly traded, making them susceptible to sharp price moves when users buy or sell more than the markets can handle…

In January, the SEC issued guidance on tokenization that distinguished between tokenized securities issued by the companies themselves and those issued by third-party such as exchanges. More recently, federal banking agencies stated that for a bank to hold tokenized assets as real assets on their balance sheets, the tokenized assets must grant investors the same legal rights as the original security. [end quote]

Anyone who puts real money into buying tokenized stocks needs to read the fine print very carefully. A token which “represents” a share of stock is not the same as an actual share of stock. If it doesn’t yield the dividend of the actual stock it’s purely speculative (like bitcoin itself) and has no real value.

Shares of stock are shares of an actual company. The financial reports of the company reports earnings per share. Tokenized stocks issued by third parties would be excluded.

I can understand why an investor (e.g. a non-U.S. investor) might want to buy a share of a U.S. company over the blockchain – IF it was an actual share of stock issued by a company. I can’t understand why anyone would buy a share of “tokenized” stock or why it would be valued anywhere near the real share.

Wendy

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Run away, run away!

No SIPC or FDIC

The guamire looks deep, dark, and murky.

Based on recent reports from late 2025 and early 2026, the question of whether China has hacked Bitcoin is central to a major geopolitical dispute, with China accusing the United States of orchestrating a $13-$15 billion Bitcoin heist.

[image]The Block +2

Here is a breakdown of the situation:

  • The Allegation (Nov 2025): China’s National Computer Virus Emergency Response Center (CVERC) claimed that a “state-level hacking organization” (implying the U.S.) stole 127,000 Bitcoin from a Chinese-based mining pool, LuBian, in December 2020.
  • The Dispute: While China alleges a “state-backed crypto heist,” the U.S. government maintains it lawfully seized these funds as part of an investigation into a massive fraud and money-laundering scheme involving Chen Zhi of the Cambodia-based Prince Group.
  • The Evidence: The stolen Bitcoin remained dormant for nearly four years before being moved to wallets in 2024, which blockchain analytics firm Arkham Intelligence identified as belonging to the U.S. government.
  • Technical Context: The original 2020 theft was likely made possible by a “weak-key vulnerability” (related to poor randomness in key generation, sometimes linked to the “MilkSad” flaw) rather than a direct, forced break-in of the Bitcoin network itself.

[image]The Block +3

Summary:

  • Did China hack Bitcoin? No public, credible evidence suggests the Chinese government has successfully hacked the core Bitcoin network.
  • Is China a victim of a hack? China claims that its miners were victims of a massive, state-level hack orchestrated by the U.S. in 2020.
  • What is the current status? The U.S. has custody of over 127,000 Bitcoin (valued at over $13 billion), which they claim is a lawful seizure of stolen criminal proceeds, while China calls it “state-level cyber theft”.
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Another way for them to stick their hands in our pockets. Beware financial products and experts.

I’m trying my best to trade stocks as little as possible. Hold good stocks and roll covered calls up or down as needed generating income.

The Captain

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A lot of gambling products from offshore are hitting the US.

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Who needs “tokenized stocks” when we have 24/7 sports betting?

intercst

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I think that’s the end goal. And it’s unlikely that “tokenized” stocks will really take off until that happens. But once it does, there’s no reason anyone would then care.

Remember, stocks are already “tokenized.” Like bearer bonds and real property deeds, we’ve already created a legal framework where the holder of a token (in this case, a “share”) is deemed to be the owner of the thing that the share represents. If you owned a physical share certificate, the law says that it means you own the interest in the company that the share represents. So too with a bearer bond (though they’re not really used any more) or a property deed.

The key there is that the law establishes that tokenization. The law says that ownership of the token means ownership of the asset. Blockchain failed to revolutionize the way property and assets were sold because there were no laws creating that link, and you can’t create that link with code or contracts. An NFT or a blockchain token could “represent” an asset, but ownership of the token did not (and could not) transfer ownership of the “represented” asset.

It would be a relatively easy fix to change the law to provide that blockchain tokens are the same as conventional shares. And if that happens, there really won’t be much concern about owning shares through that mechanism. There are lots of complicating details, of course, but the core idea isn’t that different from how shares work today.

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@albaby1 since I’m not a lawyer I will ask…

If two parties sign a contract with each other would the contract be void if there was not a law enforcing that specific class of contract?

Wendy

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My head hurts

LOL202020

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There doesn’t need to be a law specific to that class of contract, no, since there is a general law of contracts that holds that all contracts are enforceable unless otherwise prohibited. That’s the default. So you do need a law for a contract to be enforceable, but there is a law that provides for all contracts (whatever class) to be enforceable generally.

The reason you need a change in the law for tokens to work like stock shares isn’t because contracts aren’t enforceable, but because contracts aren’t necessarily assignable. The key aspect of a stock share is that I can sell it to anyone, and they step into my contractual position vis-a-vis the underlying company, and the company doesn’t have to be involved in that transaction. All of the ownership and contractual rights are enforceable by the person who owns the shares, no matter who that is (some exceptions apply).

That doesn’t apply to contractual relations that haven’t been “tokenized” like shares or bearer bonds. If I enter into a contract with you, and you “sell” that contract to another person, they don’t have any enforcement rights against me. To use the legal term, they’re not in privity with me - I didn’t agree with them to give them any rights. Their contract is with you (when you guys agreed to whatever you agreed to when you “sold” the contract), not me. Some contracts have explicit assignment clauses, of course - but absent that, contracts are between the initial parties.

Tokenizing an asset changes that. The contract (or ownership) runs to the holder of the token, not to any specific party. So the contractual rights can move with the token, rather than being locked into the initial party to the contract.

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Question for you one this. Since ownership of the token will be dictated by block chain (IIUC), what happens if quantum computing breaks the encryption?

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People will have to make sure they have new wallets, I imagine. Quantum computing threatens the security of the key encryption for the wallets, not the tokens themselves. There are encryption technologies that are “future-proofed” against improved decryption capabilities that QC can bring.

The bigger difficulty might be finding a way around the “code is law” issue that comes with blockchain tokens. Conventional shares can be “involuntarily transferred” when the law requires - fat-fingered trades can be ordered to be reversed, assets seized in a court proceeding or by the government can be ordered transferred to the appropriate party, etc. Harder to do that with blockchain assets. Not unique to securities, but if we move securities onto the blockchain en masse it will become a much more significant issue.

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