Tokenized Equities Need an ADR Structure to Protect Investors

Tokenization holds transformative potential for capital markets, offering real-time settlement, expanded investor access, and programmable financial infrastructure. Yet current models for tokenized equities remain fragmented and opaque, lacking the safeguards of traditional securities markets.

Two dominant approaches exist today. The first involves tokenized IOUs providing synthetic equity exposure without direct ownership rights. These tokens lack governance claims, operate in closed ecosystems, and face regulatory uncertainty—particularly for U.S. investors. The second approach creates native digital shares via blockchain, aligning closer with securities law but introducing operational hurdles. Liquidity remains fragmented between on-chain tokens and traditional shares, while inconsistent broker-dealer standards hinder institutional participation.

The market needs a hybrid model combining blockchain's speed and composability with the clarity and investor protections of conventional frameworks—akin to an American Depositary Receipt (ADR) structure for digital assets.