Are tokenized securities a double-edged sword? The NYSE's entry and the turning point in the financial markets

The New York Stock Exchange (NYSE) announced last month in mid-month the development of a trading and settlement platform for tokenized securities utilizing blockchain technology. This decision is not merely a platform upgrade but a move to fundamentally rebuild the rules of securities trading with a 200-year history. However, this entry could be a double-edged sword for the financial markets. While it brings innovative efficiency, it also has the potential to create unpredictable risks for existing players and market participants.

The participation of the world’s largest exchange in the tokenized securities market is a clear signal that this domain is no longer the sole activity of crypto startups but has become a battleground for mainstream financial infrastructure. Wall Street’s determination to incorporate advanced DeFi productivity is causing ripples throughout the entire cryptocurrency market, forcing all market participants to face a stark choice: adapt or be eliminated.

24/7 Trading and Instant Settlement: The Bright and Dark Sides of Revolutionary Efficiency

The “hybrid architecture” that NYSE plans to adopt combines existing high-performance trading engines with blockchain-based settlement mechanisms. The Pillar matching engine, capable of processing millions of orders per second, handles dollar-denominated orders at high speed, while the settlement process is completed on the blockchain.

This design eliminates delays and credit risks associated with traditional T+1/T+2 settlement cycles, enabling atomic settlement—simultaneous exchange of funds and assets at the time of trade. Furthermore, the “odd-lot trading” feature allows small investors worldwide to purchase expensive stocks with small amounts of dollar-denominated tokens, significantly lowering entry barriers for individual investors.

However, this efficiency comes with hidden costs. In a new realm of 24/7 trading markets, there is a high likelihood that liquidity in local markets will become extremely fragmented during late nights and weekends. There are also risks of widening bid-ask spreads and abnormal volatility due to cross-timezone trading. In other words, optimization for institutional investors could threaten smaller liquidity providers.

Another innovation is “tokenized deposits.” Through partnerships with Citibank and BNY Mellon, real-time settlement becomes possible even outside banking hours, drastically reducing idle funds needed for clearing operations. While capital efficiency will improve dramatically, it also means that risk management across the entire financial system will become more complex.

Global Exchange Wars: Securing Liquidity Through Different Strategies

NYSE is not isolated in this field. Major exchanges worldwide are competing to enter the tokenized securities market with different approaches.

Last fall, NASDAQ submitted an application to the SEC to integrate tokenized stock trading. Their chosen “hybrid model” offers investors a cautious evolution, allowing them to select either traditional settlement methods or tokenized settlement. Meanwhile, NYSE is taking a more aggressive and innovative approach by building an independent tokenized securities platform.

Across the Atlantic, even more intense competition is underway. The London Stock Exchange is pushing the DiSH (Digital Clearing House) project to realize 24/7 cross-border instant settlement. Germany’s Deutsche Börse, with its “Horizon 2026” strategy, has already achieved issuance exceeding 10 billion euros on its D7 digital securities issuance platform, securing a first-mover advantage in Europe. Meanwhile, Singapore Exchange is collaborating with the Monetary Authority of Singapore (MAS) to pilot government bond settlements using central bank digital currencies.

These diverse strategies among exchanges suggest that the tokenized securities market is a competitive arena without a single standard. The winner will depend not only on technological superiority but also on adaptability to regulation and how well they build interoperability among various players.

From Tokenization Projects to Liquidity Providers: Survival Strategies for Market Participants

NYSE’s entry will have complex effects across the entire crypto industry as a double-edged sword.

Challenges for Tokenization Projects

Native companies like Ondo Finance and Securitize will find that NYSE’s entry presents both opportunities and threats. Regulatory certainty will dramatically improve, expanding cooperation opportunities with institutional investors. However, as NYSE controls the source of asset liquidity, these projects may be forced to shift roles from “asset issuers” to “asset distributors.” Losing their vested rights could increase uncertainties for new ventures.

Liquidity Shift to Cryptocurrency Exchanges

The NYSE offering 24/7 tokenized securities trading will pose a strong competitive threat to crypto markets. Many funds holding liquidity in stablecoins may shift toward more stable, high-yield US stock assets. Tokenized stocks with clear regulatory protections and revenue models will attract funds away from less practical, story-dependent altcoins. This could accelerate liquidity shortages in small altcoins.

Additionally, individual investors who previously accessed US stocks via crypto exchanges may directly flow into NYSE’s “odd-lot trading” feature on the tokenized platform.

Algorithmic Revolution for Liquidity Providers

The emergence of 24/7 markets will require market makers to develop real-time, cross-asset hedging capabilities across markets. Traditional NYSE market makers will need to integrate with DeFi AMM (Automated Market Maker) logic, and DeFi protocols will need to incorporate high-frequency matching technologies akin to Pillar in traditional finance. Only players who successfully merge these technologies will ensure survival in next-generation markets.

Conversely, the risk of liquidity fragmentation will also increase. Cross-timezone trading causes geographic dispersion of liquidity, leading to wider spreads and abnormal volatility. Small liquidity providers will need to urgently reconstruct their survival strategies.

To Adapt or to Fall Behind: The Path Toward Financial System Digitization

NYSE’s development of a tokenized securities platform effectively declares a fundamental rebuild of the financial markets “at the code level.” This is not just an extension of trading hours but an indication of revolutionary improvements in capital efficiency and the fusion of DeFi and CeFi.

For the crypto market, this signifies a shift from “stories” to “physical backing.” For traditional finance, it represents a second industrial revolution after absorbing DeFi’s advanced productivity.

What matters most is that NYSE’s market entry signals not just “whether to enter” but the beginning of a new competition: “how to adapt.” The digitization of the financial system is irreversible, and only players capable of responding will become the leaders of the next-generation capital markets. The fusion of traditional market reliability with cutting-edge technology is the only way to survive the digital age. All market participants must first understand and master this “digital context.”