Tokenized Stocks vs. Traditional Exchanges
Ionixx Technologies
Specialized FinTech firm delivering IMS services and solutions to capital markets participants and financial platforms
Robinhood just launched its own blockchain to support trading of tokenized U.S. stocks in the EU, an ambitious step that’s already drawing sharp reactions from both advocates and skeptics.
In this issue, we break down:
What this model actually enables
Why traditional exchanges should be watching closely
The structural flaws critics are flagging
What tokenized private equity mean for market access and risk
Why regulators are unlikely to stay quiet
But first, here are some quick Weekly insights into big news that made headlines in the FinTech industry.
Weekly Insights
What’s Happening?
Earlier this month, Robinhood announced its own blockchain platform, built to let users in the EU trade tokenized versions of U.S. equities through the same app interface. Behind the scenes, these are tokenized derivatives, not actual shares, but they’re backed by U.S.-held stocks in custody, offering a real-time price feed while unlocking some of the programmable functionality of on-chain assets.
The model allows for wallet-based ownership, DeFi integrations, and automated corporate actions, like dividends, via smart contracts. But the biggest headline: 24/7 access to trading tokenized U.S. equities, a move Robinhood hopes will appeal to a global retail base and push financial rails further into blockchain territory.
The Real Disruption: Not Just Tech, But Trading Flow
According to Galaxy Research, Robinhood’s strategy pulls trading activity off traditional exchanges and into its own sovereign block space. This challenges the NYSE and other major players by redefining where liquidity and volume live.
This is especially critical given that traditional exchanges rely heavily on trading fees and market data for sales revenue. Moving volume off-platform threatens the value of centralized data and surveillance altogether.
Zack Pokorny of Galaxy notes that with Bitstamp (now acquired by Robinhood) acting as an after-hours venue, the company is creating a parallel market infrastructure that works across borders and time zones, something legacy exchanges are simply not built to support.
The Friction: Spread Risk, Regulatory Headwinds & Structural Gaps
Rob Hadick of Dragonfly is among the voices raising flags. He argues that while tokenized stocks may be transferable and accessible, they’re fundamentally flawed for real, large-scale use.
The vehicles holding the actual shares can only be bought during traditional market hours. That means after-hours and weekend trades will rely on market makers taking on significant price risk, forcing them to widen spreads and retreat from liquidity provisioning when volatility spikes.
These are more than edge-case risks. For professional firms and institutional players, such uncertainty makes these instruments effectively unusable. Retail may experiment, but sophisticated volume won’t follow.
Private Company Tokenization: Promise and Pitfalls
Robinhood’s model doesn’t stop with public equity. The firm is also offering token exposure to private companies like OpenAI. These are not equity shares, but derivative tokens loosely tied to valuation, raising serious concerns over disclosures, rights, and investor protections.
Alex Johnson of Fintech Takes sums up the problem clearly: private firms don’t want these markets to exist. Many won’t tolerate third-party tokens riding their valuation without permission or transparency, and for retail investors, the line between token and equity is far from obvious.
Regulatory Reality: SIFMA Pushback & SEC Scrutiny
On the regulatory front, the backlash has already begun. SIFMA, a key trade association, urged the SEC to reject no-action or exemption requests from firms offering tokenized equities, arguing that major changes to securities regulation require proper review and public comment, not shortcuts.
Galaxy Research noted that this reflects not just industry defensiveness but growing discomfort with how far tokenization models are starting to stretch beyond familiar frameworks. Whether the SEC acts swiftly or waits for broader precedent, regulatory friction is inevitable.
Our Expert Take
What Robinhood is doing here is less about offering tokenized stocks and more about quietly redrawing how retail access to financial markets might work in the future. They have always been at the forefront of vertical integration, and they’re using Arbitrum for now, but that’s just a warm-up. The real plan is to move everything over to their own blockchain - a custom Layer 2 - where they’ll control the rails, the flow, and the experience.
Right now, it’s being rolled out in Europe because that’s where the regulatory breathing room exists. And while this looks like stock ownership on the surface, it’s not. You’re not buying actual shares; they’re tokens that reflect the value of those shares in a contract that promises to match the performance of the underlying asset. The real shares are held by Robinhood, and you’re trusting them to honor the connection.
This introduces a counterpart risk in case Robinhood goes down. Might be a similar method to the one brokers like Trade Republic use to let you "buy fractional shares", you're actually buying a certificate from TR. But here, there is the potential of committing large amounts of money without understanding the additional risk.
There’s also the speed of this rollout. Robinhood has gone from offering crypto in the EU to tokenized stocks, and now they’re planning to add crypto perpetuals by the end of summer. Add in the Bitstamp acquisition, and you can see how they’re setting up an all-in-one blockchain-native investment platform for Europe - while U.S. regulators are still trying to define what tokenization even means.