The US stock market is valued at about $68 trillion, but only about $670 million of that value currently exists in token form on-chain.
The size of that gap has become a concern for policymakers and market participants as regulators signal a shift toward integrating blockchain-based settlement into the core of the U.S. financial infrastructure.
Last week, Paul Atkins, the chairman of the US Securities and Exchange Commission (SEC), said that tokenization could become a central feature of US markets within “a few years”. He described the combination of advances in electronic commerce and distributed ledger technology as the most significant transformation in decades.
His comments mark a marked departure from the agency’s previous stance and suggest a faster-than-expected modernization cycle in the U.S. market.
Bitwise CIO Matt Hougan contextualized the scale of the transition by comparing the current tokenized equity footprint of $670 million to the broader market of $68 trillion.
The figures illustrate how early the process still is and highlight the distance between the existing system and a potential future in which securities regularly move across blockchain rails.
While the comparison does not imply a specific timeline, it does outline the structural challenge that would accompany even an incremental adoption of tokenized settlements.
A shift in regulation driven by market structure
In his interview, Atkins argued that tokenization could improve predictability and reduce risk by reducing or eliminating the gap between trade execution, payment and final settlement.
The potential for intraday or real-time settlement is one of the key reasons why regulators are reassessing how digital assets fit within existing rules.
Atkins also acknowledged that the SEC has historically lagged behind innovation and sometimes resisted developments that later proved sustainable.
However, the agency has recently taken a different direction. Several investigations have been halted, roundtable discussions on digital assets have resumed and Commissioner Hester Peirce described the new approach as ‘fast, careful, creative and workable’.
Specifically, the SEC is developing a “token taxonomy,” rooted in the Howey test but designed to account for how networks mature, divide control, and ultimately operate without an identifiable issuer. The taxonomy is intended to define which digital assets fall within the SEC’s jurisdiction and which do not.
The shift is partly driven by a desire to land tokenization activities. The collapse of FTX in 2022 and the continued operation of LedgerX under CFTC supervision are proof that US regulatory structures can protect customer assets when applied to digital systems.
As a result, the head of the financial regulator sees an opportunity to direct token settlement to supervised locations rather than offshore entities.
Bottlenecks in regulations
Despite the new direction, several obstacles remain.
Commissioner Caroline Crenshaw has noted that some tokenized equities marketed as “wrapped securities” may not reflect the same economic rights, liquidity conditions or protections as the underlying instruments.
She said these products don’t always provide one-to-one representation and can complicate investor expectations, suggesting new rules may be needed.
Tensions in the industry were evident at the SEC Investor Advisory Committee meeting, where representatives from Citadel Securities, Coinbase and others debated how tokenization should interact with decentralized finance.
Citadel urged the SEC to ensure that all intermediaries involved in trading in tokenized securities, including decentralized protocols, are identified and subject to existing definitions of exchanges and broker-dealers.
On the other hand, Coinbase argued that imposing broker-level obligations on decentralized systems would be operationally incompatible and could introduce new risks by forcing protocols to take control.
The differences reflect competing visions of how the infrastructure of tokenized markets should be built.
One model is in line with traditional intermediate systems; the other relies on programmatic, non-custodial protocols. The SEC will need to evaluate whether these frameworks can coexist or whether tokenized securities require a more prescriptive structure.
In particular, the pending request to change Nasdaq’s rules adds additional urgency. The exchange has proposed leaving front-end trading unchanged and allowing tokenization at the post-trade level through the Depository Trust & Clearing Corporation.
The SEC is due to respond this month, and the decision will likely impact how other market participants design their tokenization strategies.
Scale, infrastructure and technical limitations
Meanwhile, a practical obstacle to broad tokenization is the scale of US market activity.
For context, Nasdaq processes approximately 2,920 transactions per second and a daily notional value of $463 billion. By comparison, public blockchains cannot yet match that performance and reliability, even if they can improve post-trade workflows.
Thus, bringing a significant portion of U.S. securities onto blockchain rails would require substantial upgrades at clearinghouses, custodians, broker-dealers, and digital asset networks.
Considering this, Atkins’ comments have been interpreted as a signal that regulatory hesitancy is no longer the main constraint.
Instead, market participants now face the task of aligning technical capacity, operational risk controls and compliance frameworks with the settlement models that regulators expect to consider.
If tokenization becomes a formal part of the US market structure, institutions will need systems capable of handling digital issuance, on-chain reconciliation, and regulatory reporting on an industrial scale.
Data from RWA.xyz shows that the total value of real assets in the chain has grown to about $35.8 billion, about double the level at the end of 2024.
Although small compared to the broader financial system, the growth signals increasing comfort with the representation of traditional assets in the chain, particularly government bonds, cash instruments, credit and other low-volatility exposures.
The expansion provides early evidence that tokenized markets can attract regulated institutions once regulatory frameworks stabilize.
Global competition and the way forward
Other jurisdictions have moved faster than the United States in adopting tokenized market infrastructure. Singapore and Hong Kong have launched tokenized bond programs, digital fund structures and bank-issued blockchain settlement systems.
As a result, U.S. regulators are aware that unclear rules could push tokenization abroad, especially if synthetic or packaged products remain in legal limbo.
Atkins positioned the United States as the target to regain leadership in this area, arguing that clear rules will allow market participants to innovate domestically.
Whether the US will close the tokenization gap will depend on how quickly the SEC finalizes its taxonomy, how it resolves conflicts between TradFi and DeFi, and how infrastructure providers respond to the operational demands of blockchain settlement.
If compliant pathways develop as Atkins outlines, the current tokenized footprint of $670 million could increase significantly in the coming years.
However, if the rules remain uncertain, capital may continue to flow to jurisdictions with more mature frameworks.