The Future of Tokenized Stocks: Overcoming Current Limitations

New technologies often begin with limitations, similar to the early days of digital music. However, they eventually improve and become the norm. The same pattern is expected to emerge with tokenized stocks. Currently, these stocks are inferior to traditional market offerings, with restrictions such as limited trading hours, geographic restrictions, and lack of voting rights. These limitations are largely due to regulatory compliance and infrastructure shortcomings. Nevertheless, as regulations become more defined and infrastructure improves, these limitations will be overcome. Standardized know-your-customer (KYC) processes will enable interoperability between liquidity pools, and increasing regulatory maturity will likely enable voting rights, dividends, and tax automation. As tokenized stock trading becomes comparable to traditional stock trading, it will appeal to those with limited access to stocks. Moreover, on-chain offerings will go beyond parity, with the potential to provide tokenized access to private companies and enable the use of on-chain assets in decentralized finance (DeFi) services. The ability to delegate voting rights to trusted experts through smart contracts could also transform corporate governance. While early adoption is driven by users with unique needs and risk tolerance, the potential for growth is significant, with the current crypto asset market being dwarfed by the potential for stocks and bonds to come on-chain.