Digital asset treasury (DAT) companies that tokenize their stocks on the blockchain amplify the risks faced by investors, as highlighted by various professionals in the crypto industry.

“Blockchains trade 24/7, while traditional markets have set operational hours,” Kadan Stadelmann, Chief Technology Officer of the Komodo decentralized exchange platform, remarked.

Sudden price fluctuations occurring outside the hours when traditional markets function may result in a stock run on a treasury company that has launched both tokenized and traditional shares, without adequate time for the company to react to a price drop.

Tokenized stocks have crossed $1.3 billion in value. Source: RWA.XYZ

The risks are further aggravated by possible exploits via smart contracts or hacking incidents that could impact both the crypto assets held by the treasury company and the tokenized shares, Stadelmann warned. Kanny Lee, CEO of SecondSwap, expressed:

“Tokenizing DAT equity introduces a synthetic layer atop another synthetic layer. Investors face double exposure: first to the volatility of the treasury’s crypto, and secondly to the complexities of corporate equity, governance, and securities law. This significantly heightens the risks associated with already volatile assets.”

Tokenized stocks are rapidly gaining traction as numerous companies adopt this approach, and the U.S. Securities and Exchange Commission (SEC) is exploring the idea of round-the-clock capital markets. However, the absence of legal clarity positions tokenized stocks in a regulatory gray area.

SEC and Marketplaces Advocate for Tokenized Equities and Continuous Trading

The U.S. SEC is looking into blockchain-based stock trading to modernize the outdated trading model which currently shuts down during nights, weekends, and holidays, alongside lengthy settlement durations compared to digital asset technologies.

SEC officials are deliberating on enabling regulated retail crypto exchanges to provide tokenized stock trading services in the U.S. market.

Nasdaq president Tal Cohen announces the push for 24 hour stock trading. Source: Tal Cohen

Traditional stock exchanges like the tech-oriented Nasdaq and the New York Stock Exchange (NYSE) are advocating for extended trading hours to align with the 24/7 trading environment of crypto markets.

In March, Nasdaq revealed plans to initiate 24-hour trading, five days a week, with a target rollout planned for the latter half of 2026.