Wall Street Tokenization: Could Blockchain Replace Traditional Stock Trading?

Two executives told CNBC's ETF Edge that tokenized equities might replace much of Wall Street's current trading infrastructure. One predicts rapid uptake, while the other believes the process will be gradual.

Nick Cherney, head of innovation at asset manager Janus Henderson, and Gabor Gurbacs, founder and CEO of tokenization platform Openassets, shared their views on the SEC's approval of tokenized stock trading.

What the SEC Allowed for Tokenized Equities

An order from the SEC on Sept. 17 permits blockchain-based platforms to trade tokenized versions of listed U.S. stocks without having to register as exchanges. Each token must confer the same rights as the traditional share it stands for.

The order restricts trading to approved participants and imposes caps on symbols and volume. The relief is set to expire after five years.

Issuers also have the ability to object before venues list tokens created by outside firms. Cherney pointed out the order's limited scope and its strong emphasis on trading infrastructure.

Investors May See Little Change at First

Gurbacs noted that buying a stock today typically involves around nine intermediaries. He expects tokenization to eliminate six or seven of them. He said new rules for transfer agents, which govern who records share ownership, enable that change.

For investors, however, the experience should remain similar, Gurbacs said, while settlement and costs change behind the scenes. Cherney agreed that the existing brokerage model can transition to a blockchain with minimal visible difference.

Cherney argued that cost savings alone will not drive adoption, as U.S. markets are already efficient. Instead, he suggested new applications, such as paying rent with an S&P 500 fund.

Still, Cherney was straightforward about the outcome.

“we see it as an inevitability”

Nick Cherney, Head of Innovation at Janus Henderson, told CNBC.

Scale Shows How Early the Shift Still Is

Janus Henderson’s most successful tokenized fund, sold offshore to institutions, has ranged between $500 million and $1 billion. The firm’s flagship ETF manages about $30 billion, Cherney said.

In comparison, Gurbacs said global ETFs total about $24 trillion, while tokenized assets, including stablecoins, remain below $500 billion.

So the answer to the headline question appears to be yes, but in stages. The five-year exemption could reveal whether U.S. investors follow the roughly 200 institutions already using Janus Henderson’s tokenized funds.