Why tokenization is an ETF-style market structure revolution
The current tokenization dialogue and pattern resemble ETFs’ early days, which ultimately transformed into a $10+ trillion market, Lie argues.
A robust tokenized asset isn’t simply “issued” once like a stock or bond – it typically can be minted or burned on demand against some pool of underlying assets or rights. For example, when a token represents shares of a fund or stock, authorized participants (or smart contracts acting as such) should be able to deposit the underlying and mint new tokens or redeem tokens for the underlying assets.
If the token trades above the value of its underlying holdings, arbitrageurs will mint new tokens (injecting supply) until prices realign; if it trades below, they will redeem tokens (reducing supply) until the discount closes. The economic principle is identical to ETFs. The token is a wrapper on the same assets, and arbitrage keeps its price honest.
With respect to both ETFs and tokenization, the wrapper is simply a liquid representation of a basket of economic exposures. An ETF share is not the underlying securities themselves, but a standardized claim on a basket that trades efficiently because creation and redemption keep it aligned with the underlying assets. Tokenization follows the same logic. The token becomes the liquid instrument, while the underlying assets remain the economic anchor. What matters is not the form of the wrapper, but the strength of the arbitrage link between wrapper and basket.
ETFs already represented a major leap in transparency by making baskets of assets trade continuously on-exchange, with visible prices, intraday liquidity, and alignment with underlying value through arbitrage. Tokenization builds on this foundation. Where blockchains can go further is in making issuance, transfers and outstanding supply observable in near real time, potentially widening visibility into how the wrapper evolves relative to the underlying basket.
One of the most important features of tokenized markets is their ability to trade continuously, even when underlying markets are closed. For anyone who has traded ETFs globally, this is not new but a familiar and highly valuable market‑structure capability. Continuous trading outside local market hours allows prices to incorporate new information as it emerges, rather than waiting for the next open, and enables investors across time zones to transfer risk when they actually need to. These prices reflect informed expectations — built using correlated instruments, futures, FX, and broader market signals — in the same way international and cross‑timezone ETFs have operated for decades.
