EDITORIAL | Why Accounting and Price Discovery Remain the Biggest Hurdles to Capital Markets Tokenization

As Wall Street races to bring stocks, bonds and funds onto blockchain rails, some of the industry’s biggest institutions are discovering that tokenization may solve old inefficiencies while simultaneously creating an entirely new set of market structure problems.

The debate has now moved far beyond crypto experimentation. Institutional firms, including BlackRock, Franklin Templeton, and Apollo Global Management, have expanded tokenized investment products while crypto-native companies such as Robinhood, Kraken, and Coinbase continue pushing blockchain settlement deeper into mainstream capital markets.

Yet behind the momentum, some of the industry’s most influential market infrastructure providers are quietly grappling with a far more complicated question: how do tokenized securities coexist with the traditional financial system without breaking the mechanics that global markets already rely on?

For index provider, FTSE Russell, the issue is no longer theoretical.

Kristine Mierzwa, the firm’s Head of Digital Assets, said tokenized equities are already forcing conversations around how markets

• calculate liquidity,
• float-adjusted market capitalization, and
• index inclusion.

Modern equity indexes such as the Russell 3000 rely heavily on float-adjusted market capitalization, which measures the value of shares available for public trading.

However, if a company issues part of its equity through traditional exchanges while another portion exists as blockchain-based tokens, index providers must decide whether those tokenized shares belong inside official benchmark calculations.

The challenge is not simply mathematical. It reflects a broader infrastructure mismatch between blockchain markets and traditional finance.

Today, many pension funds, mutual funds and large institutional investors still cannot directly custody tokenized securities because most regulated custodial systems were designed for conventional assets rather than blockchain-native instruments. Some of FTSE Russell’s advisory committees remain cautious about including tokenized shares in benchmark calculations for exactly that reason.

That custody problem sits at the heart of Wall Street’s slower approach to tokenization.

While crypto firms have long embraced open blockchain networks, large banks and asset managers are instead building tightly controlled private systems – effectively ‘walled gardens’ where tokenized assets can move within regulated environments that preserve:

• compliance,
• identity verification, and
• institutional safeguards.

The strategy reflects a fundamental divide between crypto-native finance and traditional finance.

Banks want the efficiency benefits of blockchain settlement, including faster clearing and reduced collateral friction, without surrendering oversight, regulated counterparties or existing risk controls. Crypto firms, meanwhile, continue pushing toward open and interoperable markets operating around the clock.

Mark Wendland, CEO of Canton Strategic Holdings, described the debate as the difference between “true native issuance” and tokenized replicas of existing securities.

The distinction matters because blockchain settlement fundamentally changes how ownership moves through markets.

Traditional stock trading still relies on multiple intermediaries and delayed settlement systems that can take one or two days to fully reconcile securities and collateral transfers. Tokenized securities could compress much of that process into near real-time settlement, potentially unlocking major capital efficiencies across financial markets.

But always-on blockchain trading also introduces new complications around pricing and liquidity.

Traditional equity markets close overnight and on weekends. Blockchain-based markets do not.

That creates difficult questions around price discovery. If tokenized shares of a company such as Apple continue trading over the weekend while the Nasdaq remains closed, Wall Street firms may eventually need to determine whether the ‘real’ market price emerges from the traditional exchange or from blockchain markets operating continuously.

The problem becomes even more complex if multiple tokenized versions of the same stock begin trading simultaneously across different platforms.

Some versions may include dividend rights while others do not.

Some may settle through regulated custodians while others trade freely through decentralized infrastructure. In practice, this could create multiple blockchain-based share classes tied to the same underlying company, each with different liquidity profiles and pricing behavior.

That fragmentation threatens one of the core assumptions underpinning modern equity markets: that a single stock has a unified and transparent market price.

Index providers may eventually need entirely new methodologies to aggregate liquidity and valuation across multiple tokenized representations of the same security, similar to how markets currently handle class A and class B shares.

Operational timing creates another layer of complexity.

Many financial benchmarks depend on synchronized market data across equities, currencies, and derivatives markets. But tokenized assets trading continuously do not align neatly with traditional financial operating hours.

Foreign exchange hedging markets, for example, still largely close on weekends. If tokenized equities continue trading while currency hedges pause, benchmark providers may need interpolation models to estimate pricing during those gaps.

Even stablecoins, often viewed as the bridge between crypto and traditional finance, expose similar structural tensions.

Many stablecoin issuers back reserves with U.S. Treasury holdings, yet Treasury markets themselves do not operate continuously. If stablecoin holders demand large redemptions during weekends or periods of market stress, issuers could face liquidity mismatches between always-on crypto markets and traditional financial rails that still operate on limited schedules.

These frictions help explain why Wall Street’s approach to tokenization increasingly resembles a gradual infrastructure migration rather than a wholesale financial revolution.

Large institutions appear willing to adopt blockchain technology but only within frameworks that preserve

• regulatory oversight,
• controlled access, and
• compatibility with existing market systems.

That cautious strategy may slow full decentralization but many industry executives now believe interoperability between traditional finance and blockchain infrastructure could arrive sooner than previously expected.

The challenge for Wall Street is no longer deciding whether tokenization has value. The challenge is rebuilding decades of financial plumbing:

• custody,
• settlement,
• pricing,
• liquidity management, and
• benchmark construction

so that on-chain assets can function at institutional scale without destabilizing the broader market structure.

Stay tuned to BitKE for deeper insights into tokenization globally.

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