Galaxy Digital cautions that Robinhood’s proposal to tokenize stocks on its proprietary blockchain could fragment liquidity traditionally concentrated on major exchanges like the NYSE. The firm argues that migrating equity trading to decentralized platforms may reduce market depth and price discovery mechanisms in established venues. This fragmentation risk stems from potential capital migration toward tokenized assets offering faster settlement or 24/7 trading.
The warning highlights concerns about systemic impacts if significant trading volume shifts away from regulated exchanges. Galaxy suggests this could undermine market stability metrics like volume-weighted average pricing (VWAP) and complicate regulatory oversight. Their analysis points to historical precedents where liquidity dispersion increased volatility during stress events.
While acknowledging innovation benefits, Galaxy emphasizes the need for coordinated frameworks to prevent destabilization. The firm recommends phased implementation with circuit breakers and interoperability standards to mitigate risks while allowing blockchain advantages to develop organically within existing market structures.
