On-chain equity trading can reshape markets, or ruin them

With 2026 on the doorstep, the push to move equity markets on-chain is only accelerating as the promise of 24/7 trading and near-instant settlement globally draws increasing attention. What was previously locked behind broker-dealer infrastructure is now being hailed by supporters as ‘modernization,’ but there’s something they’re not considering.

Beneath the veneer of efficiency is the fact that transferring equities to blockchain will not eliminate regulation, structural inequality, or risk. If the industry proceeds in this direction without discipline, the transition to on-chain equity trading could strip the protections that make public markets reliable.

Tokenizing equities is, in effect, a new experiment in market structure, but with stakes that span far beyond convenience. Investors’ demand for these tokenized options is growing, and companies like Nasdaq are already working with regulators to get tokenized stocks listed and trading.

If the ambition is real, the protections investors expect from regulated equity markets must be fully translated into their tokenized equivalents. The transition must have trading mechanics rooted in a smart contract and preserve the custody, disclosure, and governance that ultimately underpin legitimate markets that already exist.

The promise of speed

On-chain equities can settle trades almost instantly, reduce the cumbersome cycles associated with this form of trade, and free up capital faster for better utilization. It’s easy to see the appeal when cross-border investors gain easier access, fractional ownership, fewer jurisdictional hurdles, and the core advantage versus non-tokenized options: speed.

Analysts at the World Economic Forum have already highlighted the benefits of on-chain equity trading, including predictable settlement, lower reconciliation overhead, and programmable corporate actions, as bold steps toward tokenization. For the first time, retail investors don’t need a custodial intermediary to access fractionalized blue-chip stocks.

Blockchain’s involvement and speed capabilities open equity markets to global accessibility rather than geographic stratification. These are all tangible benefits that on-chain equity trading offers, but speed without appropriate governance quickly reveals itself to be a hollow victory for all involved.

With the hype of tokenized equities moving faster than the law, the likes of the United States’ Securities and Exchange Commission have already been making moves. Sensing both opportunity and threat, the SEC is considering limited exemptions to allow blockchain-based stock trading, but only under controlled conditions.

Liquidity mirages and regulatory loopholes

Amid all the excitement, the perils of on-chain equity trading are often overlooked, namely the under-discussed threat of liquidity. On-chain assets trade fast, but that doesn’t necessarily mean they trade deep. 

Academic research indicates that tokenized assets (even those with real-world backing) face severe liquidity cliffs, especially during volatility spikes. Synthetic equities with thin order books and insufficient liquidity to soak up sell-offs are just flash-crashes waiting to happen.

If companies or exchanges attempt to bypass securities law by claiming that on-chain is equal to being ‘outside of jurisdiction’, then the entire system could plummet after being labelled a shadow market. 

The SEC has already said that tokenized stocks will remain classified as securities and will be subject to full regulatory obligations. And a token that looks like a stock, trades like a stock, and behaves like a stock is a stock. 

Anything less than that and lacking the regulatory compliance checks is a ghost asset, nothing more.

Standards must rise, or they will fall

The time has come to choose to embrace tokenized equities as a genuine upgrade and safeguard investors, or to weaponize blockchain to erode the safeguards that make public markets trustworthy. 

Tokenized equities must confer authentic shareholder rights, include enforceable claims to dividends and corporate actions, and adhere to the same disclosure and reporting rules as modern markets. Regulators have already made their stance clear; now, safeguards and compliance need to lead the way.

The potential upside of on-chain equity trading is enormous, but only if the custodial, liquidity, and legal protections are carried forward from tested public markets. Tokenization should elevate equity markets, not hollow them out, so that tokenized equities can maintain the accountability that modern equity markets require.

The standards must rise to meet the economic requirements for investor safety, or tokenized equities will fall to the sidelines. The industry will reveal the choice made in due time.