Why Crypto Layer 1 and Layer 2 Tokens May Crash amid NYSE Tokenized Securities Plan?

NYSE is developing a platform for 24/7 trading and on-chain settlement of tokenized securities, expanding efforts to bring traditional financial products on-chain. However, many claim that the stock exchange’s tokenized platform could impact the growth of Layer-1 and Layer-2 projects.

How NYSE’s Tokenized Securities Platform Will Create Issues for Crypto Projects?

NYSE is seeking regulatory approval for a plan to develop a platform for trading and on-chain settlement of tokenized U.S. stocks and ETFs, enabling 24/7 trading, fractional shares, near-instant settlement, and stablecoin-based funding. Binance founder CZ said NYSE’s tokenization platform is bullish for crypto and crypto exchanges.

The design combines the NYSE’s Pillar matching engine with blockchain-based post-trade systems. It offers multi-chain capability for settlement and custody, allowing flexibility across different networks as digital infrastructure evolves. However, the announcement did not disclose any specific blockchains. The use of private blockchain networks for these processes aligns with regulatory requirements for securities trading.

Many believe NYSE’s new tokenized securities platform could make crypto-native Layer 1 blockchains like Ethereum and Layer 2 projects obsolete. Institutions could prefer features such as 24/7 trading, instant settlement, and stablecoin funding within a regulated system rather than crypto-native networks.

Also, if liquidity shifts to NYSE’s tokenized securities platform, Layer 1 and Layer 2 tokens could see selloffs. Moreover, the crypto industry’s decentralized narrative could fail as centralized-issued RWAs could dominate.

Moreover, experts have warned that Layer 2 sequencers will face requirements to register as exchanges under U.S. securities laws under the Clarity Act. Coinbase’s decision to pull support for the market structure bill may have been due to the requirement.

SEC Commissioner Hester Peirce earlier stated that L2 chains relying on centralized sequencers or matching engines like Base, Optimism, and Arbitrum for transaction orders could be viewed as operating like traditional exchanges.

Ex-Nasdaq Claims NYSE Tokenization Move Is Misunderstood by Markets

Ex-Nasdaq Options specialist Andrew Hiesinger said “NYSE is not turning stocks into crypto, moving markets on-chain overnight, or launching DeFi for equities.”

NYSE is exploring a tokenized securities platform where trading mechanisms remain the same, but post-trade settlement occurs on-chain rather than through legacy settlement systems. This would enable faster settlement, stablecoin funding rails, and better cross-border efficiency.

The extended hours require regulatory approval and tedious coordination across exchanges, clearinghouses, and brokers. The tokenized platform is subject to SEC review and rule filings that would take years.

While the infrastructure and regulations for tokenized securities offerings have picked up pace, adoption remains low. DTCC received a no-action letter from the US SEC to allow tokenization services for DTC-custodied assets.