Fairmint CEO Joris Delanoue warns tokenized stocks risk recreating Wall Street’s 1960s paper crisis through fragmented systems and standards.
- Tokenized stocks are solving a real access problem, but Delanoue says the industry is moving faster on distribution than on ownership records and market infrastructure.
- A token that tracks a stock is not necessarily the stock. The critical question is whether the issuer-authorized shareholder register recognizes the holder.
- Delanoue says interoperability, rather than rival exchanges building closed systems, will determine whether onchain equities become durable market infrastructure or another source of fragmentation.
Crypto’s tokenized-stock boom risks creating a digital version of the “paper crisis” that brought Wall Street’s settlement machinery close to breaking point more than half a century ago, according to Joris Delanoue, CEO of onchain securities infrastructure provider Fairmint.
In the late 1960s, booming U.S. stock trading overwhelmed a market reliant on clerks processing paper share certificates. Back offices fell behind, securities went missing and settlement failures piled up. The New York Stock Exchange even closed on Wednesdays for part of 1968 to let firms catch up.
The crisis helped drive a redesign of U.S. post-trade infrastructure, including centralized securities depositories and the formation of the Depository Trust Company.
“The main question today is whether we are recreating the paper crisis, but as a digital crisis,” Delanoue told CoinDesk in an interview.
The danger, he said, is that exchanges, special-purpose vehicles (SPVs), token wrappers and proprietary ledgers could fragment ownership records as tokenized stocks grow.
“A token is not equity, but equity can be a token,” Delanoue said. “When equity is a token, this token has the same safeguards, guarantees and trust as you had in the previous system.”
Some tokenized stock products, however, provide only economic exposure to an underlying share rather than legal ownership. That can leave investors dependent on intermediaries and create uncertainty over voting, dividends and claims to assets if an issuer or SPV fails.
Tokenization of real-world assets has accelerated as banks, asset managers and crypto firms experiment with putting stocks, bonds, funds and other traditional assets on blockchain rails. Tokenized equities have emerged as a particularly active area, fueled by demand for easier, round-the-clock access to U.S. stocks worldwide.
The global market for tokenized equities has grown to roughly $2 billion, from less than $500 million at the end of the first quarter, though it remains a rounding error compared with the more than $100 trillion traditional equities market.
Fairmint provides onchain infrastructure for issuing, managing and recording securities, acting as an SEC-registered transfer agent with the blockchain serving as the authoritative shareholder record.
Bullish, CoinDesk’s parent company, agreed in May to acquire transfer agent Equiniti for $4.2 billion to add those sorts of capabilities to its digital asset exchange.
Tokenized stocks meet global demand
Demand is real, particularly from investors outside the U.S. seeking exposure to American equities, Delanoue said.
“People underestimated the demand across the world to effectively own a piece of a U.S. company, and even more so the Magnificent Seven stocks that anyone in Asia or Europe would love to have in their portfolio,” he said.
The “Magnificent Seven” refers to seven dominant U.S. technology stocks: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla.
Providers including xStocks, Robinhood and Dinari have sought to meet that demand. Delanoue doesn't see distribution as the problem. The question is what investors actually own after buying a token.
A token can provide economic exposure to a share without making its holder a shareholder recognized on the issuer's official books. Structures that use special-purpose vehicles or intermediaries potentially place several layers between investors and the underlying company.
Fairmint, an SEC-registered transfer agent that says it has processed more than $1.6 billion of equity natively onchain since 2019, instead puts the shareholder record itself onchain, Delanoue said.
“There is no mirror,” he said. “The ledger is where everything is written, and our authority comes from our role as transfer agent.”
Start with the boring part
Delanoue said crypto has focused on distribution and rapid transfer while paying less attention to record keeping, administration and compliance.
“People build the distribution and find a way to move things very fast without any care for the administration or record keeping, which is the boring part,” he said.
Layers of SPVs can complicate who's actually entitled to what.
If an investor puts money into a layer-10 SPV structure before an IPO, Delanoue said Fairmint's system would know exactly what that investor is entitled to at the “moment of the waterfall,” something most SPV structures today have no way of tracking.
A distribution waterfall determines how proceeds from an SPV are allocated among investors and other stakeholders, and in what order.
The next fight is interoperability
Delanoue warned against closed ecosystems in which crypto exchanges, traditional exchanges and infrastructure providers each maintain their own standards.
Fairmint has made its onchain securities standard open source so trading systems, issuers, broker-dealers and transfer agents can connect to it, he said.
“If they don't [solve interoperability], fragmentation will kill the small players,” Delanoue said.
The opportunity, he said, echoes the one Wall Street faced after the paper crisis: establish a common infrastructure that competing market participants can trust.
The difference is that the previous solution was centralized. Blockchain offers the opportunity to build a distributed foundation instead, Delanoue said, provided the industry agrees on shared standards before fragmentation becomes its own crisis.
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Anvil is a shared on-chain collateral layer built on a programmable letter of credit: reserve assets as a guarantee -no loan, no interest, keep custody & yield.