The Missing Piece of Tokenization: Why Stocks and Bonds Still Need Cash

The crypto sector has accelerated deployment of tokenized securities platforms over the past eighteen months. Venture-backed startups build infrastructure to migrate equities and fixed income to blockchain. Market participants project trillion-dollar volumes. Policymakers draft regulatory frameworks. Yet one operational requirement remains systematically underexamined: the structural necessity of segregated cash reserves.

The crypto narrative promises elimination of intermediaries. If securities exist as tokens, settlement friction disappears. Clearing cycles compress to minutes. Third-party custodians become redundant. Operating costs plummet. The vision appeals to believers. Yet it mistakes architectural desire for operational reality.

Atomic Settlement and Liquidity Constraints

Tokenized equity and debt markets demand immediate liquidity at settlement. A buyer transfers payment tokens. A seller transfers security tokens. Both legs must execute simultaneously. If the buyer lacks sufficient balance at settlement confirmation, the transaction fails.

… Continue reading the full article at the original source below.