Tokenized stocks risk repeating Wall Street’s 1960s ‘paper crisis,’ Fairmint CEO says
Fairmint CEO Thibauld Delanoue warns that the rapid growth of tokenized stocks could lead to a digital version of the 1960s Wall Street 'paper crisis' due to fragmented ownership records. He emphasizes that while tokenization offers accessibility, it risks creating legal and settlement uncertainties if not properly regulated.
Why it matters
As traditional finance integrates blockchain, the potential for systemic failure in digital asset infrastructure poses significant risks to global market stability.
In the late 1960s, booming U.S. stock trading overwhelmed a market reliant on clerks processing paper share certificates. Back offices fell behind, securities went missing and settlement failures piled up. The New York Stock Exchange even closed on Wednesdays for part of 1968 to let firms catch up.
The crisis helped drive a redesign of U.S. post-trade infrastructure, including centralized securities depositories and the formation of the Depository Trust Company.
“The main question today is whether we are recreating the paper crisis, but as a digital crisis,” Delanoue told CoinDesk in an interview.
The danger, he said, is that exchanges, special-purpose vehicles (SPVs), token wrappers and proprietary ledgers could fragment ownership records as tokenized stocks grow.
“A token is not equity, but equity can be a token,” Delanoue said. “When equity is a token, this token has the same safeguards, guarantees and trust as you had in the previous system.”
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