Wall Street’s adoption of crypto is finally happening.

First came the ETFs. Then everyone realized stablecoins were transforming money.

Next comes the multitrillion-dollar heart of global capitalism: the stock market.

For centuries, finance has been built on a complex and often creaking infrastructure of gatekeepers. For all its importance, this system remained largely untouched by the digital revolution.

Until now.

The “great re-plumbing” of finance is underway. Tokenization promises to convert the value of any asset in the world into a digital token that can be owned, traded, and managed on a global, open network.

Mark my words: Every stock, bond, piece of real estate, barrel of oil, and work of art will eventually become tokenized.

What is ‘Tokenization?’

…and why is Wall Street racing to adopt blockchain tech?

Tokenization is the process of creating a digital representation of a real-world asset on a blockchain.

Imagine you own Manhattan real estate. In the old world, your ownership is a thick stack of legal documents locked in a vault. To sell a piece of it, you’d need lawyers, brokers, and lots of paperwork.

With tokenization, that building can be converted into, say, 1 million digital tokens. Each token represents a tiny, fractional share of the property. These tokens exist on a blockchain, and owning a token is the digital equivalent of owning a brick in that building.

This token contains all the relevant information: your ownership rights, the asset’s details, and a verifiable history of every time it has changed hands.

This entire process is underpinned by the security and transparency of the blockchain. Every transaction is recorded on the immutable ledger.

The major benefits of tokenizing assets include…

Access

By dividing high-value assets like real estate and fine art into millions of tokens, it creates fractional ownership. Suddenly, you don’t need $50 million to invest in an office building. You can start with $100.

The total value of all real-world assets is estimated to be over $250 trillion. Much of this wealth is “illiquid.” It’s locked up. Tokenization is the key to unlocking all that value.

An asset that might take months or years to sell in the traditional market can now be traded instantly, globally, and around the clock.

Tokens can be traded 24/7 on global exchanges. An investor in Tokyo can seamlessly sell their fractional ownership of a New York skyscraper to a buyer in Brazil, on a Sunday.

Global investors get access to US assets.

US investors get access to private companies and “exclusive” assets like fine art.

Faster and cheaper settlements

The traditional financial system is a labyrinth of intermediaries. Brokers, lawyers, custodians, and clearinghouses all taking a cut, adding costs to every transaction.

Tokenization cuts out the middlemen. Transactions are executed directly between buyer and seller on the blockchain. It’s finance without (most of) the financiers.

A real estate transaction that might incur tens of thousands of dollars in legal and administrative fees can be executed for a few hundred dollars via a smart contract.

When you buy Apple (AAPL) stock today, your trade goes through multiple intermediaries, each taking fees and adding days to settlement. The current T+2 system (trade plus two days) exists because moving ownership of a stock requires armies of back-office staff, legal documentation, and cross-checking between institutions.

Robinhood’s (HOOD) tokenized stocks settle instantly. Zero intermediaries. Zero settlement fees.

Banks currently spend billions of dollars a year on settlement infrastructure. JPMorgan Chase & Co. (JPM) alone employs thousands of people just to move ownership records from one computer to another.

When settlement happens automatically through smart contracts, those costs disappear.

Have you wondered why big players like BlackRock (BLK) are gung ho on tokenization? No clearing fees, settlement delays, and lower operational overhead is your answer.

The promise of tokenization is mortgages that close in hours instead of weeks. Stock trades that settle instantly instead of requiring complex clearing arrangements. Foreign exchange that happens without correspondent banking relationships.

This is not a question of if, but when and how fast this transition will occur.

What Does Tokenization Mean for Crypto?

It answers the #1 question on every crypto skeptic’s mind: “Blockchain, what is it good for?”

Now, every time someone trades a tokenized stock on Robinhood, they’ll use the blockchain. Robinhood built its product on Arbitrum, which is a “Layer 2” network running on Ethereum (ETH).

This is how Ethereum becomes the new settlement layer for global finance.

This equals more activity, which means more fees (and ultimately higher prices).

Tokenization also shifts the driver of crypto prices from speculation to fundamentals. From worthless, speculative tokens to quality cryptos with real businesses.

Until now, crypto prices were mostly due to speculation.

Protocols launching real, valuable products with quality tokens would get sued by regulators, while “meme makers” did as they pleased.

Regulatory uncertainty kept institutions from entering the industry.

Now, both trends are reversing. Wall Street’s march into crypto will mean fundamentals, revenues, and profits finally start to matter. You can already see this trend in crypto prices over the past month or so.

Expect to see crypto markets bifurcate, similar to what happened to tech during the dot-com washout. Back then, great businesses like Nvidia (NVDA), Amazon (AMZN), and Google (GOOG) continued to thrive while the Pets.coms of the world faltered.

Going forward, the biggest winners in crypto will be those generating a lot of revenue and solid tokenomics.

And my recommendation for investing in the crypto space has always been to buy real crypto businesses making real money.

If it feels like the financial system is being rebuilt from the ground up… it is.

Crypto is playing a big role—but it’s just one piece of a much larger shift happening across markets, technology, and the economy.

In The Jolt, my free letter, I discuss these big disruptions as they unfold and help readers find the best ways to get in on the ground floor—before the institutional money comes marching in.

If you’d like to join us, sign up here to start getting The Jolt twice a week.

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Stephen McBride is Chief Analyst, RiskHedge. To get more ideas like this sent straight to your inbox every Monday and Friday, make sure to sign up for The Jolt, a free investment letter focused on profiting from disruption.