Author|Zach Pandl, Research Director at Grayscale
Compiled| Wu Shuo Blockchain
The tokenization of global stock markets is underway. Tokenized stocks are expected to offer users multiple benefits, including 24/7 trading. The next major development will be DTCC [1] launching a tokenization pilot on the Canton Network [2]. This pilot will enable tokenized stocks and other assets to circulate within the regulated financial system via blockchain infrastructure.
We believe that the tokenization of stock markets will progress in three stages, each adding value to different types of blockchain infrastructure (see Chart 1).
The first phase is the third-party "wrapper" model [3]. Under this model, the issuer holds shares through a special purpose vehicle (SPV) [4], and tokenized shares represent a claim on that SPV. Currently, more than 70% of tokenized stocks by market capitalization use this model. Wrapper-type tokenized stocks do not represent actual ownership of the underlying shares, but they can be used in DeFi and may appeal to retail investors. These assets are currently traded on networks such as Ethereum, Solana, and BNB Chain.
The second phase is the "entitlement model" [5], and the DTCC pilot is a representative example of this model. Instead of creating new versions of securities, DTCC is tokenizing existing qualified securities through its regulated post-trade infrastructure, with the Canton Network serving as the first blockchain network for this pilot.
The third stage is the issuer-led model, in which companies directly issue securities natively on-chain. Last week, Securitize [6] became the first publicly traded company to tokenize its common shares during its listing on the New York Stock Exchange. We believe this model holds the greatest long-term potential, but still requires further regulatory clarity. In our view, the issuer-led model will be more favorable toward open-architecture blockchains such as Ethereum and Solana, as well as hybrid networks like Avalanche.
These three tokenization models are likely to coexist for many years to come.
Key insight: There are multiple models for tokenized stocks. We believe the blockchain networks most likely to benefit from tokenization growth include Ethereum, Solana, BNB Chain, Avalanche, and Canton Network.
Chart 1: Third-party platforms currently dominate the tokenized stock market, while Ethereum, Solana, and BNB Chain hold the majority share of on-chain assets.
Note:
[1] DTCC: The Depository Trust & Clearing Corporation, one of the core post-trade infrastructure providers in the United States, primarily provides clearing, settlement, and custody services for securities transactions.
Canton Network: A blockchain network designed for institutional financial assets, emphasizing privacy, compliance, and asset transfer between different financial institutions.
[3] Wrapper model: Also known as the "wrapper model," this refers to a structure where a third-party platform holds underlying stocks and issues on-chain tokens representing associated rights. Investors hold claims against this structure, not necessarily direct ownership of the stocks themselves.
[4] SPV: Special Purpose Vehicle, a legal entity established by the issuer to hold the underlying stock assets, with tokens representing investors' claims on that entity.
[5] Entitlement model: Also known as the "entitlement confirmation model," this does not involve reissuing a new security, but rather recording or mapping existing qualified securities onto the blockchain through a regulated post-trade system, enabling them to circulate within blockchain infrastructure.
[6] Securitize: A platform for digital securities and tokenization of real-world assets. The article mentions that it tokenized its common shares upon listing on the New York Stock Exchange.