The future of capital markets is being rewritten on blockchain, and two distinct blockchain-securities products structures are emerging.
This article breaks down the rise of tokenized securities versus digitally-native on-chain securities, exploring the features of each and what that means for issuers, investors, and financial intermediaries.
Tokenization is a powerful force with the potential to reshape the foundations of capital markets by transforming how financial assets are created, traded, and custodied.
The concept of tokenization has been popularized in 2025 through high-profile announcements from Nasdaq, Kraken, Robinhood, and other financial institutions exploring tokenized versions of traditional investment products - primarily equities. The headlines mark a turning point: tokenization has moved from pilot projects into mainstream financial discourse.
The idea of tokenization, however, is not new. Experiments began years earlier with “real-world-asset” (RWA) tokenization efforts to create blockchain-based representations of physical assets such as gold, real estate, and U.S. Treasuries. What has changed is the increasing application of tokenization to core financial services products such as equities, bonds, and investment funds.
As capital markets evolve from electronic to digital with the integration of blockchain technology into market infrastructure, two distinct models for blockchain-based securities are now emerging: tokenized securities and digitally-native securities, issued directly on-chain. Both leverage blockchain to modernize markets, but the underlying structures - and their implications for product issuers, investors, RIAs, and broker-dealers - are fundamentally different.
For issuers, the choice determines how efficiently - both from a cost and process perspective - these products can be brought to market.
For investors, it impacts the speed of settlement and the rights and protections they receive.
For intermediaries, it defines how they modernize infrastructure to meet client demand, expand offerings, and preserve their role as trusted gatekeepers.
Tokenized securities are traditional securities that have been represented on a blockchain. In most cases, the original asset - such as a stock, bond, or fund - is issued in traditional, electronic form and then mirrored on-chain through a token.
Key features of tokenized securities include:
Representation, not origination: The security originates in a traditional format and is later wrapped or mirrored onto a blockchain. Some tokenized securities structures are synthetic representations of a traditional asset, where the price is not directly linked to the underlying asset and investors do not receive shareholder or governance rights.
Reliance on intermediaries: Legal ownership and record-keeping typically remain with custodians, transfer agents, and clearing agencies (such as the DTCC), while the blockchain representation serves as a secondary form of record-keeping and way to digitally transfer ownership of the asset.
Infrastructure constraints: Because the original security is off-chain, settlement, clearing, and custody often still rely on dual on- and off-chain infrastructures, limiting efficiency gains and duplicating costs.
Regulatory considerations: Tokenized securities are subject to the same federal securities laws as their traditional counterparts, but practical questions remain about custody and “possession and control” of private keys under SEC rules, and whether the tokenized holder is granted the same investor rights associated with the off-chain security.
Digitally-native securities are securities that are originated and issued directly on a blockchain, rather than being mirrored from a pre-existing, traditional asset. These are also referred to as digital asset securities.
Key features of digitally-native securities include:
Blockchain as a single source of truth: The blockchain ledger itself serves as the official record of ownership, transfer, and settlement.
Full lifecycle blockchain integration: From issuance to secondary trading, custody, and corporate actions, all processes can occur on-chain.
Efficiency gains: By eliminating duplicative systems and intermediaries, issuers and investors benefit from faster settlement, lower operational costs, and improved transparency.
Regulatory alignment: Custody and trading can take place within an SEC-registered broker-dealer and ATS ecosystem with federally-approved frameworks for exclusive private key possession and control standards. Investors in digitally-native securities are granted 100% ownership rights and protections associated with traditional equity shares.
Tokenization is a transitional step towards fully digital markets, providing potential investor benefits including faster trades, greater transparency, and fraction share trading. Digitally-native securities, by contrast, represent the future of fully realized, modernized capital markets where blockchain-integrated market infrastructure provides the foundation of issuance, trading, and custody.
The bottom line takeaway is that tokenized securities are a bridge to modernized markets, while digital-native securities are the destination.
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Disclaimer: The information contained herein is provided for informational purposes only and should not be construed as a recommendation to buy, sell, or hold any digital asset securities or tokenized securities. Digital asset securities may not be suitable for all investors. Investors should note that investing or trading in digital asset securities could involve substantial risks, including no guarantee of returns, costs associated with selling and purchasing, and no assurance of liquidity, which could impact their price and the investor's ability to sell, and possible loss of principal invested. There is always the potential of losing part or all of your money when you invest in digital asset securities.
Not SIPC or FDIC insured. For further risk disclosure information see Digital Asset Securities Risk Disclosure, and Regulatory Considerations sections in Disclosures.
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