Columbia Business School professor Omid Malekan has sharply criticized the New York Stock Exchange's (NYSE) recently announced plan for tokenized securities, labeling it "vaporware dressed up as innovation." Malekan argues that the NYSE's proposal lacks crucial details and fails to leverage the true potential of blockchain technology, potentially missing out on the future of finance.
Key Takeaways
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The NYSE's tokenization plan is criticized for its lack of specific details regarding supported blockchains, stablecoins, programming languages, and token standards.
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Professor Malekan suggests the NYSE's approach prioritizes maintaining its existing business model and partners over embracing decentralized finance (DeFi) principles.
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The plan's features, such as 24/7 operation and instant settlement, could potentially be achieved with current technology without tokenization.
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The professor draws parallels to AT&T's missed opportunity with Google in the late 1990s, warning the NYSE against failing to adapt to the next era of finance.
A Lack of Substance
Omid Malekan, an adjunct professor at Columbia Business School and author on crypto and finance, expressed significant skepticism regarding the NYSE's ambitious tokenization initiative. In his analysis, the announcement was filled with buzzwords but conspicuously absent of concrete details. Malekan highlighted several critical questions left unanswered by the NYSE, including:
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Which specific blockchains and stablecoins will the platform support?
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What programming languages, virtual machines, and token standards have been decided upon?
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Which jurisdictions will the tokenized exchange serve?
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Will the platform integrate decentralized tokens and DeFi tools?
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How does the NYSE intend to generate revenue within this new tokenized system?
Malekan pointed out that such details are essential, especially given that the plan is "pending regulatory approvals." He contrasted this with Galaxy Digital's more transparent approach when tokenizing its own equity, which involved a detailed report on the technical particulars.
Innovation or Imitation?
Further fueling Malekan's doubts are the specific features the NYSE has outlined. He argues that capabilities like around-the-clock trading and instant settlement are not exclusive to blockchain technology and can be achieved with existing database systems. The NYSE already operates sophisticated systems capable of such functions, though implementing them might disrupt the business models of its current partners.
Malekan emphasized that the true innovation of permissionless blockchains lies in their architecture, which enables bearer-like assets accessible globally without numerous intermediaries. He believes the NYSE's plan, by preserving existing intermediation and focusing on "qualified broker-dealers," fails to tap into this core benefit of blockchain. The exchange's revenue streams, derived from fees charged to broker-dealers, HFT firms, and clearing members, are unlikely to translate directly to a DeFi environment on a public blockchain.
A Cautionary Tale
Drawing a parallel to the late 1990s, Malekan recalled AT&T's strategic missteps with the internet, particularly its rejection of an offer to acquire Google. He suggests that the NYSE, like AT&T in that era, may be prioritizing its current customer base and business model over embracing a potentially disruptive future. Instead of integrating directly with DeFi, the NYSE is pursuing its own version of tokenization, which Malekan believes serves its existing structure rather than ushering in a truly new financial paradigm.
While acknowledging the NYSE's attempt as a significant signal of impending change in the financial landscape, Malekan cautioned against viewing it as anything more than an indicator. The professor's assessment suggests that the NYSE's current tokenization plan, as presented, may indeed be more "vaporware" than genuine innovation.
Sources
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The NYSE's plan to tokenize stocks is likely to fail, Fortune.
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The NYSE’s big tokenization plan is vaporware dressed up as innovation, Yahoo Finance.
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