Tokenization of real world assets is now a strategy for Wall Street and in a matter of months platforms like Robinhood and Kraken launching tokenized equity trading and the exchanges seeking SEC approval to trade digital stocks while the DTCC has instituted a groundbreaking pilot infrastructure for the summer, but this new 24/7 market fragmentation is creating some glitches with tokenized versions of stocks like Amazon experiencing wall price deviations from counterparts now financing legends including Larry Fink as well as Rob Goldstein recently outlined the structure. guardrails needed to keep these markets safe, pointing directly to the backbone of trading reference data as well as identity certainty while joining us here live at the New York Stock Exchange to discuss how to maintain on financial stability as the senior director and head of standards at Global Services, Matt Bastian.
Matt, great to have you here.
Thank you so much for joining me.
Thanks for having me.
Well, when we're talking about tokenized assets becoming mainstream, what are some of the fragmented price gap risks that we need to be mindful of.
Sure, so maybe taking a step back and looking at how we would bucket tokenized assets, I think you can look at it as, and this is just a high level overview, you have digital natives, so these are security tokens that are issued directly onto the blockchain.
You have digital twins, so these are tokenized representations of, say, book entry shares, and they convey the same economic rights as the book entry shares, so voting, dividends, etc.
The investor knows exactly what they're getting.
Where the fragmentation can come in is what I would call the digital cousins to continue the metaphor, and those can be securities in their own right.
They may or may not convey the same economic rights.
There could be collateral shares or other types of collateral behind the tokens, and you can think about American depository receipts as an analog there, or they could be the pure synthetics, and that's, I think that's where the real.
Risk for investors could lie is all you're buying is price exposure to Nvidia, Apple, Alphabet, you know, some of the big names.
There was actually a story in The Wall Street Journal last summer about some of these offshore platforms that are issuing tokens and they're just calling it whatever the underlying name is, and the price swings can be upwards of 300%.
So that's where some of the risk comes in for investor protections.
Yes, and I think it's very helpful that you outline the landscape and you have those analogies whether we're talking about the cousins or the twins here as well as the digital natives, but you're highlighting some of the risks.
But where do the opportunities lie right now?
Well, if you think about the tokenized future, I think there are a lot of opportunities there.
It's moving the markets to where the same.
Infrastructure for cash flows.
If you think about the introduction of stablecoins, it's also something that fulfills the promise of the smart contract.
And the way to think of a smart contract is it's essentially the token which could be a certain number of shares combined with encoded instructions for splits, redemptions, and other life cycle events.
So there really are some.
Opportunities in the tokenized future.
Again, it's just that unique identification and making sure investors know what they're buying that I think is going to be the critical piece of connecting the TraDF and the DeFi worlds.
And finally, we are talking about a highly regulated market here.
So what do you think needs to happen on the technology side when it comes to code as well as the regulatory landscape?
Yes, it's an interesting question.
I think the general consensus is function, not technology, should dictate the regulatory touch.
So for example, if a digital wallet functions as a brokerage account, that's how it should be treated.
So focus more on the function rather than the technology as we move into this tokenized future.
Yes, and less than 60 seconds here, but of course we are heading into the second half of 2026.
So what do you expect to see unfold when it comes to this landscape?
In the rest of this year, yes, so you already touched on the DTCC pilot program that actually begins this summer, and they're going to be starting with Treasuries, ETFs, and a few select equities and then NASDAQ and where we are today, the New York Stock Exchange both have their own proposals out to tokenize all their listings.
So I think we'll see those developments start to happen the second half of this year.
Well, Matt, great to have you here.
Thank you so much for joining us and thank you so much for weighing in.
Thanks so much.
