In Washington, the cryptocurrency industry just suffered a crushing legislative defeat. On Wall Street, the crypto-powered tokenization of financial markets is proceeding at a rapid pace. Despite the contradiction, the future is already here. Crypto technology is moving from the fringes toward the center of finance, whether or not legislators approve.

With the support of President Donald Trump, who made more than $1 billion from crypto ventures last year, Wall Street is embedding the blockchain technology powering Bitcoin into almost every corner of the financial system. Crypto and traditional finance firms are "tokenizing" or creating programmable versions of stocks, bonds, and other real-world assets and moving them onto blockchain networks that could one day replace the traditional venues that match trades, custody stocks, and settle transactions.

For investors, tokenized stocks could herald the beginning of round-the-clock trading, with instant purchases and access to the proceeds of sales. That would be particularly beneficial for overseas investors, who currently must confine their transactions to U.S. trading hours. Switching brokerages -- a cumbersome process that takes days to weeks -- also could happen almost instantly, while violations for using unsettled proceeds to trade stocks would largely disappear.

For the firms that power trades, the change potentially is even more profound. Much of Wall Street's capital essentially is sitting today in the wrong place at the wrong time. Banks, brokerages, and asset managers position excess collateral at different institutions, wait for transactions to settle, and sometimes must borrow money because of asset-transfer delays. Modernizing the market's plumbing could free up billions of dollars now idled as traditional systems process trades.

"This is a watershed moment," says former New York Gov. Andrew Cuomo, who co-chairs OKXICE, a joint venture between New York Stock Exchange owner Intercontinental Exchange and crypto platform OKX.

The JV announced on Oct. 4 that it plans to launch a tokenized market. Cuomo compares the move to tokenized trading to the birth of automated mortgage underwriting or the digitization of the stock market in the early 2000s. "I would hope that Wall Street as Wall Street still exists, but it will have to do business differently," he says.

The emerging tokenization trend has little to do with Bitcoin, but relies on the blockchain technology that powers crypto trading. A blockchain is typically a decentralized digital database shared across a network of computers that is difficult to hack. Bitcoin traded on the first widely used blockchain, but companies are now applying the innovation to trade stocks and other assets. Even as the value of the crypto market has grown to nearly $3 trillion, the golden goose for some crypto firms has been winning the right to tokenize hundreds of trillions of dollars worth of traditional assets, including stocks.

Moving stock trades "onchain" could fundamentally change how a trade is processed. Transactions now move through a broker, an exchange, a clearinghouse, and other intermediaries, all of which carry separate ledgers that must be matched up before trades settle hours to days later. A blockchain-based system could remove these inefficiencies, creating instant settlement.

The benefits gained from blockchains could be enticing enough to eventually tokenize the entire trading system. In their base-case estimate, Citigroup researchers in June projected that the tokenized asset market will reach $5.5 trillion by 2030, up from $17 billion today. In addition to stocks, firms plan to bring bonds, funds, and even illiquid assets such as private equity and real estate onchain.

Several factors have coalesced to create this "liftoff" moment, including the rise of stablecoins, a type of token pegged to the dollar. Stablecoins have been used until now to trade cryptocurrencies and would be essential to executing tokenized asset trading in many models. Circle Internet Group has issued one of the largest stablecoins, with a market capitalization of more than $73 billion, and various consortia of banks and retailers have announced in the past year that they are creating their own.

Some investors also see tokenized systems paving the way for artificial-intelligence "agents" to execute financial transactions. Agents work autonomously and can transact through traditional financial systems, but are much more valuable in a world where markets never stop trading.

The value of always-open markets became clear earlier this year when Trump launched major offensives against Iran outside normal market hours. With traditional futures markets closed, trading volume exploded on the crypto platform Hyperliquid in oil-related "perpetual" futures. By the time traditional markets opened, the crypto market had effectively priced in the news.

A major step forward in the tokenization of markets is slated to occur later this month, when the Depository Trust & Clearing Corp., or DTCC, which ensures that trades are processed and settled correctly, flips the switch on a platform allowing its customers to tokenize many stocks, exchange-traded funds, and other securities. DTCC's platform will let participants convert tokenized assets to traditional assets, and vice versa, in part to avoid reducing liquidity. Tokenized stocks will transfer between holders almost instantly on a 24/7 basis.

"Honestly, for the past 10 years we've had innovation by press release," says Nadine Chakar, global head of DTCC Digital Assets, alluding to small, pilot tokenization programs that never involved a critical mass of participants.

Not anymore. When DTCC ran a one-day trial of the new system this past summer, dozens of major financial institutions participated, including JPMorgan Chase, Goldman Sachs, BlackRock, and the New York Stock Exchange. The goal of tokenized equity is to "move the markets to an always-on economy," Chakar says.

Proponents of tokenizing stocks point to myriad advantages. The benefits of the DTCC platform mostly accrue to institutional investors, chiefly by speeding market plumbing. Under the platform that DTCC is launching this fall, investors' trades will execute and settle through conventional methods, but DTCC participants can opt to receive a tokenized version of their shares. Institutions can then move tokenized shares onchain.

Speeding up such transfers could free up billions of dollars now held by institutions as excess collateral to deal with unexpected margin calls. Margin calls wouldn't disappear, but institutions likely wouldn't have to park extra collateral at multiple institutions simply because they don't know where one might occur. Nasdaq estimates that the largest financial institutions collectively could earn up to $340 million a year in additional interest by reducing excess collateral and investing the money elsewhere.

Tokenization could also allow companies to pay dividends and execute stock splits programmatically, reducing the usual manual reconciliation work, which can take days. Nasdaq executives have said the shift could give international investors more access to U.S. stocks. The company plans to launch Nasdaq Equity Tokens, representing shares of publicly traded companies, next year.

"There have now been some use cases that have really unlocked the imagination of what tokenization can bring," says Tal Cohen, Nasdaq's president. "It's no longer in the background."

The Trump administration is trying to bring the benefits of tokenized stocks directly to retail investors. Trump was a vocal supporter of the Clarity Act, a sweeping crypto bill that, among other things, would have clarified that tokenized securities should be treated the same as traditional securities under the law. Senate Democrats blocked the bill for unrelated reasons, saying it didn't do enough to rein in Trump's personal crypto investments.

Yet, two days after the bill stalled, the Securities and Exchange Commission moved forward on its own, issuing an exemption that will allow crypto and traditional finance firms to proceed with trading venues that don't need to comply with all the requirements governing exchanges. Traditional exchanges generally must execute trades at the best available price. They also can't price shares in increments smaller than a penny, a rule designed to protect market liquidity. The new venues don't have these requirements.

The goal "is allowing the market to evolve, monitoring its development, and using that insight to inform a nimbler and future-ready regulatory framework," SEC Chairman Paul Atkins said in a statement.

One advantage of tokenization for retail investors would be the ability to switch brokerages readily. That would increase competition among firms, and potentially lower customers' costs. An investor who wants to change brokerages now must typically initiate a transfer using the automated customer account transfer service, or ACATS, a process that can take several business days. A transfer would take minutes under a tokenized system, says Johann Kerbrat, a senior vice president at Robinhood Markets who helps manage the company's crypto projects.

Not everyone is on board with the move toward tokenization. Tokenizing shares could make markets more prone to crashes by accelerating the pace at which investors can sell stocks, says Mark Hays, an associate director at Americans for Financial Reform, an advocacy group.

High-frequency trading, which accelerated in the late 1990s, contributed significantly to the frequency of so-called flash crashes, or sudden, steep selloffs, Hays says. Although 24/7 tokenized markets might bring convenience, there would also be a risk of overnight market crashes when liquidity is low. "If the blockchain is automatic and everything is happening in the wee hours of the morning, you need circuit breakers to keep things from crashing," Hays says.