The smartest market structure nerds I know have been talking about this for years. The idea that tokenization and smart contracts were going to take over market structure. The idea that the pipes of the financial system were going to become uprooted, decentralized, and brought on-chain.
They’ve been talking about it for so long that it started to feel like it would live forever in a future state. Like flying cars and time travel.
And all of a sudden, it looks like the future is closing in.
Nasdaq has filed a proposal with the SEC to allow it to offer securitized equities by 2026.
Gradually, then suddenly.
A tokenized stock market is starting to feel like an inevitability. And for good reason. There are real, tangible benefits that a tokenized market structure offers.
But let’s take a step back for a moment. Stocks are already super-liquid and accessible. I don’t want to make light of the efficiency gains that tokenization brings. Those are real and they are fabulous. But the problem… is there really a problem here at all?
I bring this up to contrast stocks versus Commercial Real Estate. CRE due diligence is a whole other thing. You can research stocks from your phone, but CRE requires you to get on the ground and get a little dirty.
You can buy a stock from your phone in a nanosecond. If all goes smoothly you’ll close a CRE deal in under four months.
For the Real Estate market, tokenization efficiency gains are a whole other thing. The efficiency gains are massive and game-changing.
I recently met with a Real Estate property owner to talk about tokenization. This was a bit of a test run - part of an effort to connect with the target market to see just how far the gulf was between crypto entrepreneurs and real estate operators.
However large you suspected that gulf to be, let me assure you it is larger.
I’m looking at a fax machine sitting on top of an oak cabinet. It’s not even dusty. It’s on, although some red light is blinking.
There is a stack of papers. I can only see the top one, but it appears to be a printout of an email. I think this guy prints his emails on paper every day to read the paper copies. Yah, this guy is old school.
He’s tough. He’s old, and he’s tough. His nose looks like it has been broken a dozen times. It points in one direction, and then the tip points in another direction. He’s got a thick New York accent. He is warm and friendly, but tough too. Tough without trying to be.
I’m trying to explain blockchains. I’m trying to explain tokenization. This is going nowhere.
Finally I just say: “Your grandkids want to buy your properties through their phones, and as fast as it can be done. Would you make your properties available to them?”
That’s as simple as I can make it.
And he looks at me up and down. “I don’t know about this. If they want to make an offer they can send me a signed offer letter.”
Yah, there is a gulf between the real estate market and the crypto market. A big, big, big one.
The gulf to institutional investors is less dramatic, but a wide one all the same. What it really comes down to is trust. The trust layer.
Memecoins might operate on the principle of Caveat Emptor, but Caveat Emptor doesn’t scale. Not to the serious players.
Institutional Investors do business with GPs that they trust. They buy and sell securities on exchanges they trust, through brokers they trust, overseen by regulators they trust, and certified by rating agencies they trust.
Transactional efficiencies are great, but trust is a prerequisite to the whole thing. Without trust, tokenization is worthless.
And with trust, it is the future.
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Personal note: I’ve been teasing this for a while now, and I’ll be making a big announcement in the next week or two. I am launching a new startup that will solve trust for CRE, and it will do it at scale, with automation. This will unlock not only tokenization, but the modernization of CRE access and trading. I’ve got two fantastic co-founders, an anchor client, and a product that is going to change how investors buy and sell CRE. If you are a potential strategic partner or want to learn more, now is the time to reach out. This is the ground floor. -Phil