How do tokenized stocks work? A conversation with the head of digital assets at BlackRock

Tokenized Episode 76, Speaker: Pet Berisha (Co-founder of Tokenized)
Guests: Rob Hadick (Dragonfly GP), Robert Mitchnick (Head of Digital Assets at BlackRock), Noah Levine (Partner at Andreessen Horowitz)

Timeline:

00:00 Introduction

02:17 Tokenization is essentially a story of "access," allowing more investors to access asset classes that were previously hard to reach.

05:51 Tokenized equity can be roughly divided into three structural types.

08:41 Tokenized assets under a whitelist mechanism have certain limitations on transferability.

11:21 The New York Stock Exchange is collaborating with Securitize to explore a 24/7 trading model.

15:00 Stablecoins are evolving into a new generation of financial infrastructure.

18:58 U.S. regional banks are building a network for tokenized deposits.

24:21 Stablecoins and tokenized deposit services cater to different types of user groups.

25:42 The demand for privacy in on-chain capital markets is significantly increasing.

31:06 Future market structures will reduce intermediary roles and become more flattened.

Takeaways:

1. Stablecoins are evolving from "payment tools" to "account-level infrastructure." Users are no longer just transferring money but directly holding balances, which naturally extends to investment, yield management, and asset allocation. For financial products, stablecoin wallets will gradually replace traditional accounts as the entry point.

2. The greatest value of tokenization is not efficiency improvement but the expansion of investment access. It allows users who previously only participated in the crypto market to access a broader range of traditional assets, while also bringing more global investors into a unified market, essentially expanding the demand side rather than optimizing the supply side.

3. Most "tokenized stocks" currently in the market are still transitional forms, essentially derivative packaging rather than real assets on-chain. Issues such as inconsistent trading hours, inability to redeem in real-time, and unclear asset ownership indicate that the true on-chain capital market infrastructure is not yet mature.

4. The truly valuable model in the future is "native on-chain issuance," rather than mapping off-chain assets onto the chain. Only when assets are directly generated, traded, and settled on-chain will new capabilities such as collateralization, portfolio management, and governance emerge, marking the starting point of structural change.

5. Whitelist and compliance restrictions are currently the core bottlenecks for the liquidity of tokenized assets. As long as assets must be transferred between restricted addresses, true liquidity and DeFi composability cannot be achieved. The industry is seeking solutions that meet regulatory requirements without sacrificing liquidity.

6. 24/7 trading is not the core demand; the real demand comes from "asset utilization efficiency." After users hold stablecoins, they not only want to trade at any time but also want these funds to seamlessly participate in investment, lending, and yield scenarios, which is the key driver of tokenization growth.

7. Stablecoins and tokenized deposits will not replace each other but will serve different scenarios. Stablecoins are more inclined towards cross-border, crypto market, and dollarization needs; tokenized deposits are more focused on the circulation of funds within the banking system and efficiency optimization. In the future, a structure with multiple forms of capital will coexist.

8. The core obstacle for banks to promote tokenization is not technology but regulatory uncertainty. Issues such as AML, compliance frameworks, and capital requirements are still not fully clarified, leading banks to proceed cautiously, even though they realize this is a transformation they must participate in.

9. Privacy is becoming a key infrastructure demand in on-chain capital markets. In payment scenarios, it can be circumvented through net settlement, but in scenarios such as collateralization, clearing, and trading, it cannot be replaced. Therefore, technologies like ZK will prioritize landing in capital markets rather than in payment fields.

10. In the long run, the structure of financial markets will significantly flatten. Current trading involves many intermediaries (brokerages, exchanges, clearing institutions, custodians, etc.), while tokenization can compress these links. The result is lower costs for investors, broader reach for asset management institutions, and an opportunity for crypto infrastructure to enter the mainstream financial system.

Pet Berisha:
Welcome to Tokenized, a show focused on stablecoins and institutional adoption of tokenized real-world assets. This time we are recording live from the Digital Asset Summit in New York. That was pretty good. Hello everyone, I’m Pet Berisha, filling in for Simon this week, but at least the accent is somewhat similar. Next to me is a guest who has always been exciting and may have tied the record for appearances on the show, Rob Hadick, GP from Dragonfly. How are you?

Rob Hadick:
I’m good, and clearly, I’m not as practiced as you, since I didn’t get through the whole opening last time.

Pet Berisha:
Well, that’s just practice.

Rob Hadick:
Right, just practice. Okay, I need to come more often.

Pet Berisha:
We also have a first-time guest, Robert Mitchnick, Head of Digital Assets at BlackRock. Welcome to the show.

Robert Mitchnick:
Thank you for having me.

Pet Berisha:
Wow, there’s applause, you see Rob didn’t get that. I don’t know why. And lastly, equally important, over there in a jacket, trying hard to imitate Cuy Sheffield’s style, is Noah Levine, Partner at Andreessen Horowitz, also known as part of the "Visa Crypto Gang." How are you?

Noah Levine:
I’m great, excited to be here.

Pet Berisha:
This is your second time on the show. Next, I need to do a segment that everyone will skip; I need to remind everyone that the views expressed by all guests today are their own and do not necessarily represent the positions of their companies. Nothing we say should be considered tax, financial, investment, or legal advice; please do your own research. Also, a big thank you to today’s sponsors, Visa and Mesh, and thanks to Mentox Global for helping us organize this event. This episode is sponsored by Visa, a leader in digital payments. Visa’s tokenized asset platform, VTAP, uses smart contracts and cryptography to help banks bring fiat currency on-chain. Whether issuing stablecoins, deposit tokens, or other forms, VTAP enables financial institutions to issue tokens backed by fiat, enhancing financial efficiency and enabling programmable finance.

Pet Berisha:
This episode is also sponsored by Stripe. Stablecoins are becoming the foundational building blocks of borderless financial services, allowing funds to flow globally like data. With Stripe, you can reach new user groups using stablecoins and crypto technology, reduce cross-border costs, and shorten settlement times from days to minutes. Most importantly, it works just like other Stripe products, completed directly in the Stripe console via API, meaning you don’t have to worry about which blockchain or wallet is being used. From Shopify to other global enterprises, many are using Stripe’s complete crypto solution to expand markets and reach more users.

Pet Berisha:
This episode is also sponsored by M0. Stablecoins are becoming global financial infrastructure, and this infrastructure needs to mature. If you are a brand, you should have your own stablecoin, and it should match the flow of funds in your products. If you are an issuer, you want to be the stablecoin partner of the most valuable brands. M0 is currently the only platform that allows issuers and brands to co-create digital currency products.

Pet Berisha:
Let’s move to the first topic. A news piece from everywhere, Larry Fink stated that tokenization can make investing as simple as paying with a mobile phone. In his annual letter, he said: half of the global population uses digital wallets on their phones; imagine if this digital wallet could also easily invest in a basket of companies like sending payments. Tokenization can accelerate this future by upgrading the underlying structure of the financial system, making investment easier to issue, trade, and access. Robert, I’ll ask you first. The reactions to this statement have been interesting; can you elaborate?

Robert Mitchnick:
Sure. I think this aligns with some of his views over the past few months or even years, and is similar to his article in the Economist last November. The core idea is: we have always viewed tokenization as a story of efficiency improvement, but in many ways, it might be more about "access." There is now a class of investors who are crypto-native or more accustomed to using digital wallets and interacting within the digital asset and DeFi ecosystem, but their allocation in traditional investments is severely lacking, even at 0%. The question is how to expose them to a broader range of investment opportunities, not just limited to the current approximately $3 trillion crypto asset market but to the entire $400-500 trillion global asset pool. I see this as a huge financial inclusion opportunity that can help people build more complete and diversified portfolios.

Pet Berisha:
Rob, would you like to expand on the "access" angle? Why can tokenization not only help crypto-native users expand their portfolios but also enhance access for ordinary investors and institutions?

Rob Hadick:
Sure. I might have a slightly different perspective than Robbie; he might say I’m wrong. From our perspective, what we see now is stablecoins rapidly gaining popularity globally, often because people want to access dollars, for example, in countries where there is 30% or 40% inflation annually; they just want to escape their local currency and enter the dollar system. But stablecoins have actually become a form of "digital oil," used to flow funds between different tokenized assets. When these assets exist in a stablecoin-like form, it becomes much easier to exchange between different assets.

The problem now is that if I’m in an emerging market and want exposure to a certain stock, the regulatory permissions, infrastructure, and structures required are very complex and costly. So we see many people using some "workarounds," like the so-called tokenized stocks from Robinhood, which are essentially derivatives: a U.S. brokerage buys stocks during normal trading hours and then issues a corresponding token, which at certain times cannot even be minted or redeemed. So many current solutions are just transitional, a form of regulatory arbitrage, rather than truly being assets of the same "form." Once these assets all become a unified form, it can break down technical and access barriers; the remaining issue is just regulatory— and as a venture capitalist, I usually tell my companies that this is a problem to consider later.

Pet Berisha:
Noah, I was going to ask you in the next topic, but since Rob mentioned these derivative structures, can you help everyone outline the current structures of tokenized stocks in the market?

Noah Levine:
Sure. I might not explain it as well as Rob and Robbie, but I’ll try. They can be roughly divided into three categories. The first category is SPV (Special Purpose Vehicle) structures. You’ll see someone set up an SPV to buy a certain stock asset, then tokenize this SPV and distribute it to a group of investors. Its value lies in the fact that if you just want exposure to price direction, this is a decent tool. But the problem is, as Rob mentioned earlier, if this thing trades for 7 days and the underlying market is only open at specific times, there will be price mismatches. Moreover, as an investor, you are buying the SPV, not the underlying asset itself, which carries risks.

The second category is "rights-type tokens," similar to what DTCC or Securitize are doing. The asset itself is issued off-chain and then tokenized, allowing wallet users to hold and gain exposure. The advantage is that it enables 24/7 trading and a certain degree of DeFi composability, enhancing asset liquidity. Of course, there is still room for improvement here.

The third category is fully on-chain issued stocks, like what Superstate and Figure are doing. In this case, new securities are issued on-chain, and holding this asset means you truly own the underlying stock. Advantages include the ability to do cross-collateralization, participate in governance voting, etc. So it’s not just about moving existing assets on-chain, but rather directly issuing them natively on-chain in the future, which is a very exciting direction.

Noah Levine:
I want to turn the question back to Robbie. You’ve done a lot of tokenization attempts, like tokenizing money market funds, and have also tried models like Securitize (through SPV and KYC, then mapped on-chain but not freely transferable). How do you see the future, for example, with more freely transferable assets or even native on-chain issuance like Superstate? Will that become part of your strategy?

Robert Mitchnick:
To clarify, our product is not an SPV or a feeder fund, but a native new fund where shares are issued directly in token form. However, transferability is still restricted; for example, they must be transferred between whitelisted addresses, which is limited by private fund rules and anti-money laundering requirements. This is a significant issue: as long as there is a whitelist, it creates a lot of friction, affecting liquidity and DeFi usability. So the entire industry is thinking about how to solve this problem without simply doing regulatory arbitrage and then asking for forgiveness later.

Pet Berisha:
I want to follow up on this question. Noah, how do you see us moving towards a more open, permissionless state?

Noah Levine:
That’s a great question. I think there are two aspects. The first is regulatory clarity, which is crucial, and we are just getting started; for example, there has been significant progress in U.S. securities regulation in the past month. The second is infrastructure; for example, Superstate and Figure still need to provide liquidity and trading through ATS (Alternative Trading Systems), which is feasible in the short term, but if we want to scale towards more institutionalization, further development is needed. So the core is continuous regulatory clarity + enhanced liquidity infrastructure.

Pet Berisha:
Let’s move to the second topic. An exclusive news piece from The Wall Street Journal: the New York Stock Exchange is collaborating with Securitize to develop a 24/7 tokenized securities platform. Securitize will become the first digital transfer agent capable of issuing blockchain-native securities for companies or ETFs. Rob, can you break this down for everyone?

Rob Hadick:
I’ll start with this and then mention a larger trend. Now everyone believes in tokenization, and there are several reasons for this, one of which is: we want to achieve weekend and nighttime trading. Currently, there are market makers trying to hedge at night, but this hedging is actually very imprecise. Especially on weekends, it’s almost impossible to hedge risks well. If you need to manage collateral or leverage over the weekend, you must have on-chain infrastructure. So everyone is trying different solutions.

For example, the New York Stock Exchange might use a separate order book, similar to a new exchange; while Nasdaq might prefer to trade tokenized assets alongside traditional assets in the same market; others are trying to introduce tokenized assets into dark pools. In short, everyone is exploring different paths. This is good for the entire industry because it will bring more innovation. Personally, I believe that ultimately all assets will be tokenized.

Pet Berisha:
Robbie, do you agree?

Robert Mitchnick:
I think there is a considerable probability that this will happen, but it’s not guaranteed. Even if the probability is not 100%, as long as it’s high enough, it justifies us investing significant resources into it. Because once it happens, it will have a huge impact on the entire financial system, value chain, and market structure, including changes to intermediary roles.

Pet Berisha:
Noah, many people are saying that 2025 will be the year of stablecoins, and 2026 will be the year of capital markets. What do you think?

Noah Levine:
I largely agree. I remember Cuy saying last year that "every bank needs a stablecoin strategy." Now, stablecoins have shifted from a question of "whether to do it" to "having to do it." The real question moving forward is: if users’ money is in stablecoin wallets, they don’t just want to see balances or make payments; they want to do more, like invest. I believe this is the true growth driver for tokenized assets, not just the 24/7 trading itself.

Robert Mitchnick:
And I think the application of stablecoins is just beginning. They have penetrated somewhat in crypto exchanges and DeFi, but in scenarios like cross-border remittances, corporate cash management, and capital markets, they have not truly unfolded yet, so there is still a long way to go.

Pet Berisha:
Let’s move to the third topic. Last week on the show, we mentioned that U.S. regional banks are building a tokenized deposit network through ZK Sync called Kari Network, with participants including Huntington, First Horizon, M&T Bank, KeyCorp, and Old National Bank, planning to launch in 2026 on ZK Sync’s permissioned chain. Rob, what do you think about this?

Rob Hadick:
I think the current discussion about "stablecoins vs. tokenized deposits" is somewhat missing the point. Essentially, we have cash equivalents and non-cash equivalents. Regulators have started discussing, for example, that Basel rules and capital requirements may be redefined, and the U.S. government has recently said that stablecoins can be viewed as similar to cash equivalents, which is helpful for capital management. So I believe these different forms of assets will ultimately serve different purposes.

For example, so-called payment stablecoins may just be a tool for fund circulation; tokenized deposits may be another tool; tokenized money market funds may be yet another tool. They will increasingly resemble today’s financial products but will be more digitally native, easier to exchange, and more liquid, while also reducing the complexity of backend reconciliation. So from my perspective, the question of "who replaces whom" is not that important.

Pet Berisha:
What about the model of bank alliances? Especially for mid-sized banks, what do you think?

Rob Hadick:
Historically, there have been many successful bank alliances, like Visa, Mastercard, and Early Warning (which later created Zelle), and even cases like Synchrony. So I do believe that some core infrastructures are better built through alliances, because if it’s a startup trying to meet the needs of so many banks, it’s actually very difficult. You have to do many things well at once, not just one thing. So I think bank alliances will play an important role in future capital market innovations and may even be essential.

Robert Mitchnick:
I think your statement is a bit too broad in looking at successful cases. Because in the blockchain and digital asset space, the historical performance of alliances has actually been quite poor—saying this is already polite. This doesn’t mean alliances can’t work, but we need to recognize that creating something truly economically valuable in this field is very difficult.

Pet Berisha:
What’s your suggestion?

Robert Mitchnick:
Let’s leave that question for others to solve. I’m currently in the banking system.

Pet Berisha:
Noah, you were previously at Visa and must have talked to many banks about why they would choose to do tokenized deposits?

Noah Levine:
That’s a good question. I think a common misconception is that people think banks are conservative and don’t want to innovate, but that’s not true. They all realize there are significant opportunities to leverage these infrastructures to create more competitive products. The main issue is regulatory uncertainty. As mentioned earlier, while there has been some policy progress, many key questions remain unclear, such as how to handle compliance and AML. So banks are very cautious.

Of course, there are some more aggressive ones, like JPMorgan Chase, which early on created JPM Coin and is now trying new things; and Citi, etc. There are indeed some alliance projects, although the probability of success is low, banks are still willing to participate because they don’t want to miss out on opportunities.

Robert Mitchnick:
I think it’s also very important to be very clear about what problem tokenized deposits are solving or what unique value they provide compared to stablecoins. This question has not been well answered currently.

Rob Hadick:
From the banks' perspective, they would say that tokenized deposits allow them to maintain control over their deposit base while continuing to engage in some fractional reserve banking. On the other side, for asset management institutions, they would want to continue managing money market funds. So this is a game between different stakeholders.

Pet Berisha:
Noah, if it’s a mid-sized bank alliance, how do you see the probability of success in the future?

Noah Levine:
I think it’s very difficult for any specific project to succeed. But from the essence of the product, stablecoins and tokenized deposits are completely different things serving different users. The current product-market fit for stablecoins is mainly in the crypto capital markets, such as fund circulation between exchanges, DeFi, and serving as a dollar store of value outside the U.S. And these banks mainly serve local customers; for example, M&T Bank will not serve Argentine users. So their use cases are more at the wholesale level, such as fund flow, backend settlement, and internal efficiency optimization. In this scenario, such projects have a chance of success, but they will not become products aimed at the general public.

Pet Berisha:
Robert, I want to ask one last question. There is an increasing discussion in the crypto industry about "privacy," such as ZK technology. Why has this issue only now been truly emphasized?

Rob Hadick:
Actually, people have always been working on this, but the demand in the past wasn’t that strong, or the only demand mainly came from some less legitimate uses. For example, when we talk about stablecoin payments, if you are doing payroll or payments, you certainly don’t want everyone to see how much each person is getting. But how do we solve this in reality? We use "net settlement," for example, aggregating a day’s transactions and then making a single settlement transaction on-chain, which itself provides a certain level of privacy.

But in capital market scenarios, such as weekend trading and collateral management, it’s completely different. You can’t use net settlement to solve it because you need to process risks in real-time. So the privacy issue becomes more critical. ZK technology can solve part of the problem, but not all of it. If you are doing these things on a public chain, the technical difficulty is actually very high.

Pet Berisha:
Let’s move to the audience Q&A segment.

Audience:
Everyone is discussing dollar stablecoins now; is there a demand for non-dollar stablecoins?

Rob Hadick:
Currently, there is no obvious demand, but there will definitely be in the future. If all capital markets go on-chain, there must be stablecoins for multiple currencies; otherwise, you will face exchange rate risks. For example, a hedge fund in the UK, if their assets are denominated in pounds, they wouldn’t want to bear dollar risk every time. So in the long run, multi-currency stablecoins will definitely emerge. At the same time, from a more macro perspective, we may be entering an era of "currency cold war," and whether we need so many different currencies in the future is also a question worth discussing.

Audience:
Stablecoins are already very useful in the financial system, but ordinary consumers still have biases against "crypto." How long will it take to resolve this issue?

Noah Levine:
Actually, many users are already using stablecoins; they just don’t know it. For example, some new banking products are built on stablecoins, but users only see a regular account. So the key is to hide crypto behind the product rather than making users aware of it.

Robert Mitchnick:
Another point is that stablecoins are not very attractive in domestic payment scenarios in the U.S., but they are very valuable in cross-border scenarios because there is more friction and difficulty in obtaining dollars.

Audience (Bloomberg):
If in 5-7 years all assets are on-chain, what will the market structure look like? Who benefits, and who suffers?

Robert Mitchnick:
That’s a tough question. But generally speaking, the value chain will shorten, and intermediaries will decrease. Currently, a stock trade involves many roles: investors, prime brokers, exchanges, clearinghouses, custodians, transfer agents, fund managers, etc. Many of these intermediary roles can be compressed and automated.

This is good for investors because it improves efficiency; it’s also an opportunity for asset management institutions because they can reach more users; and it’s an opportunity for crypto exchanges because they currently only cover a small portion of global assets and can significantly expand in the future.

Pet Berisha:
Alright, we’ll stop here for today. Thank you to everyone listening both in person and online. Thank you to all the guests.