Author: Vaidik Mandloi; Source: TokenDispatch; Compiler: Shaw, Golden Finance

Introduction

Did you know that a New York-based holding institution called Cede & Co is the legal registered holder of approximately 83% of the outstanding shares in the United States? When you buy Apple shares through Charles Schwab or Robinhood, legal ownership of those shares remains with Cede & Co.

Cede is the nominal holder of Depository Trust Company (DTC). The public notice letter submitted by the company to the U.S. Securities and Exchange Commission (SEC) stated in black and white that it "does not know the identity of the actual beneficial owner of the securities." To put it simply, Apple has no idea that you hold its own stocks. Only your brokerage knows about it - because you are only a client of the brokerage. But in the legal ownership chain, your identity will not be reflected at all.

The word "Cede" comes from Latin, and its literal meaning is "to give up power and cede territory." This name can be said to be very appropriate and full of irony.

So I delved into the origins of this system, how it will actually affect you, and whether the crypto industry’s tokenization solutions to solve all of the above problems can change the status quo.

Ownership chain and potential risks

When you purchase stocks through a U.S. brokerage, strictly speaking, what you hold is only a "security interest." To put it more bluntly, this only means that you have a contractual claim against the brokerage.

The complete process logic behind your stock purchase is: DTC updates the ledger and marks that the stock belongs to your brokerage; the brokerage then updates internal records to prove that you have the rights to the corresponding shares. There are three layers of debt IOUs between you and the real underlying stocks. You only hold the payment commitment given by the third party, and the other party may not actually hold the physical shares.

It is precisely the working mechanism of this ownership chain that brokers have the right to lend your stocks to short parties without your permission. In other words, others can use your stock to short the target you bought without you knowing about it. At the same time, you cannot directly exercise your voting rights at the shareholders' meeting. Your voting rights, like ownership, have to pass through layers of intermediaries. In addition, such securities will be repeatedly used as pledged collateral during the trading day, and eventually multiple institutions will claim to hold the same asset at the same time.

Estimated data shows that for every three U.S. bond holdings, only one corresponding holder actually holds the physical bond; the other two only hold claims, and the underlying underlying assets have already been mortgaged to others. What is even more unimaginable is that this system has evolved step by step into what it is today.

In the late 1960s, the U.S. stock market relied entirely on paper vouchers. Stock transfer means the transfer of physical paper stock certificates between institutions, and a transfer requires filling out up to 33 different documents. Every afternoon, hundreds of deliverymen (many of whom are retired police officers and firefighters) drag suitcases and large storage boxes filled with stock certificates through lower Manhattan, delivering certificates to and from various securities firms. One company, later acquired by Merrill Lynch, had as many as 600 employees handling paper vouchers alone.

In 1968, the daily trading volume of U.S. stocks exceeded 20 million shares, which was a huge amount at the time, but it was only equivalent to 1% of today’s trading volume. The massive amount of documents directly overwhelmed the back-office clearing departments of various securities firms. The New York Stock Exchange had to close every Wednesday and shorten the trading hours on other trading days just to process the mountain of paper delivery documents.

The huge operational pressure directly brought down established institutions such as Goodbody & Co Securities, which had been operating on Wall Street for decades. The chaotic paper delivery system also breeds a large number of organized financial crimes. In 1971, the U.S. Attorney General reported to the Senate that more than $400 million in securities had been stolen in just three years. A 22-year-old stock clerk at a brokerage was indicted for stealing $900,000 worth of IBM paper stock certificates.

At that time, there was talk in the U.S. Congress that it planned to bring all post-trade clearing business under the unified management of the federal government. Therefore, the financial industry has completely abandoned the original paper circulation model, built a centralized storage vault, and sealed all paper stock certificates in a unified manner. Equity changes no longer transfer physical vouchers, but only update the general ledger records. This mechanism is called voucher solidification. In 1973, the Depository Trust Company (DTC) was formed to serve as this centralized vault.

There was another alternative at the time - paperless, which would completely abolish paper certificates and allow each shareholder to hold shares directly in electronic form. But the industry finally chose the voucher solidification solution: this solution was implemented faster during the crisis and was originally only used as a temporary transitional means. However, after the Uniform Commercial Code was revised in 1994, this mechanism was formally and permanently legislated in 50 states across the United States and is still in use today.

New and old ghost stocks

This new model that relies on book records rather than physical certificates to register ownership has given rise to a new type of book mismatch problem: two parties will claim ownership of the same shares at the same time. For example, after a short seller borrows a stock and sells it, the buyer's brokerage account will show that he holds the real shares, but the original shares will still exist in the lender's system records.

Both sides of the books will show that the shares are held, and these shares can be lent again. If this operation is repeated repeatedly, the total amount of debt securities corresponding to a certain stock in the market will even exceed the actual circulating capital of the stock.

When Dole Food Company was privatized and delisted in 2017, shareholders declared a total of 49.1 million shares claiming equity, but the company’s actual circulating share capital was only 36.8 million shares, and the amount of declared equity was 33% more than the actual share capital. This kind of excess paper equity is called ghost stock. This is not due to fraud or market manipulation, but to the inherent mechanical flaws of the current clearing and settlement system. The entire system relies on the agency holding structure of Cede & Co. It wasn’t until Dole announced it was going private that DTC’s general ledger sorted out the true status of all transactions it handled.

GameStop also had similar problems on a larger scale. At the beginning of 2021, short positions in the stock accounted for more than 140% of the float, meaning that the number of shares sold short far exceeded the actual float. This short squeeze detonated the entire network. At the peak of the stock price surge, Robinhood and other securities companies directly restricted users from buying, but allowed selling. The GameStop retail community on Reddit began to question why brokers had such authority. Only then did everyone discover that the stocks in their names were not registered in their own names, but were held on behalf of Cede & Co. They were even lent by brokers for short traders of retail counterparties.

As a result, retail investors began to completely transfer their stocks from securities firms, transfer their shares to GameStop’s official transfer registration agency, and register their names directly on the company’s shareholder list. As of 2023, approximately 76 million shares have been directly registered, accounting for about a quarter of the company's total share capital.

Coinbase recently launched a tokenized stock product, claiming that the product can achieve "real equity holdings" and fully grant shareholders voting rights and dividend income. But when you dismantle the underlying operating logic, you can find: This kind of token issued by a third-party custodian with a 1:1 stock pledge is still essentially a certificate of creditor's rights of the holder against the custodian. The only change is the accounting carrier, from DTC’s traditional ledger to the blockchain ledger. The number of intermediate levels between investors and real stocks has not been reduced, and there is even one more link.

In the traditional securities system, the legal shareholder registered in the issuer's shareholder register is Cede & Co, which holds shares on behalf of DTC. The DTC ledger records the number of shares held by each securities firm, and the internal ledger of the securities firm then marks the corresponding shares in your name. There are four layers of entities between you and the company corresponding to the stock you purchased, and the company will not know your identity as a shareholder at all.

The custodial encapsulated token model adopted by Coinbase and Robinhood has not essentially changed this structure. The custodian institution still holds the stocks through DTC, and the legal registration subject of the shares is still Cede & Co. The token issuance platform issues income credit certificates corresponding to the custody assets, and the tokens you hold only represent your claim on the issuance platform.

Last year, Robinhood launched OpenAI tokenized income products in Europe based on this model. This type of token does not represent direct ownership of OpenAI company equity, but only represents your share of a special purpose vehicle (SPV) that holds shares on behalf of you. What you hold is only a partial interest in the entity, and OpenAI itself will not know your existence. Within hours of the product’s launch, OpenAI publicly stated that it had nothing to do with such tokens and had never authorized the transfer of its own equity.

In May 2026, artificial intelligence company Anthropic introduced stricter regulations, declaring that any equity transaction not approved by the company's board of directors is invalid. The PreStocks platform had previously operated an Anthropic token trading market for several months. After the announcement, the price of platform-related tokens plummeted 27% within hours.

This fully illustrates that merely obtaining exposure to the rise and fall of stock prices and truly holding stock ownership are two different things. The former can only allow you to earn profits from rising stock prices, while the latter can give you various shareholder rights, voting rights, and legal asset claims recognized by the court.

The case of SpaceX is the most typical: multiple crypto exchanges announced and sold tokenized products corresponding to their expected IPO shares, with the cumulative order amount exceeding one billion US dollars. At that time, market enthusiasm was unprecedentedly high. Previously, ordinary retail investors had no channels to invest in SpaceX. Now it seems that they can enter through crypto assets. Everyone believes that the encryption industry has finally fulfilled its original intention of lowering the investment threshold. However, the subsequent top issuer xStocks was unable to match the corresponding underlying stocks, and all exchanges could only cancel the order and issue a full refund.

This set of products has no underlying assets that can be tokenized. The entire product is only built on a piece of asset-claim commitment, and no party in the entire business link can actually obtain the corresponding shares.

There are of course possible exceptions, as well as a third new mode. Superstate is a transfer registrar registered with the SEC and can directly register legal equity on the Solana public chain. The tokens it issues correspond to real direct shareholdings, and there is no custody intermediary between investors and companies. This is exactly what the paperless solution should have been like fifty years ago, and it is the only product model where “ownership” is worthy of the name.

Kraken also relied on its licensed securities brokers to launch a tokenized stock business, which was able to maintain operations when many similar products were shut down. In fact, the Singapore Central Depository has already given all retail investors direct legal ownership of their shares, and investors can directly exercise their voting rights without any nominal holding agency in the middle.

The compliance path has clear regulatory basis. In May 2025, the SEC officially confirmed that licensed transfer registrars can use the blockchain as the official shareholder register without the need to build an off-chain backup ledger. Superstate has already implemented this model on the Solana public chain: users hold corresponding tokens, and their names will be entered into the general file of the transfer agency as the registered owner. Securitize also uses the same architecture, and BlackRock's tokenized asset fund BUIDL, which has a scale of over US$4 billion, is provided with technical support. In March 2026, the New York Stock Exchange selected the company to build its own tokenized securities trading platform.

Switzerland, Germany, Liechtenstein and other countries have also introduced laws to recognize on-chain records as legal ownership certificates. But the core obstacle is that in the United States alone, this multi-layered intermediary clearing system generates $20 billion in revenue every year. Broadridge generates approximately $3.4 billion in annual revenue from its two businesses of proxy voting material processing and investor information communication alone. When DTC launches a tokenization pilot at the end of 2025, it will still use the structure of Cede & Co as the legal registered holder, fully retaining all intermediaries in the chain.

Objectively speaking, managed encapsulated tokens are not completely worthless. For investors in areas such as Lagos and Jakarta, they had no previous channels to buy Apple and Nvidia stocks. Even if they rely on token claims held by special purpose entities (SPVs), they can be regarded as having access to investment channels that were previously unreachable. However, OpenAI can deny the legitimacy of tokens within hours of product launch, and Anthropic can declare all relevant equity transactions invalid with just a board announcement, which means that the stability of this type of investment channel depends entirely on the weakest link in the entire link. The case of SpaceX further proves that if no party in the entire business chain can raise real underlying shares, the so-called investment channels will be meaningless. The point is, investors don’t have to choose between easy global access and full and true ownership.

The above is the whole story: Most of the so-called “tokenized ownership” in the industry today is just moving the IOUs (IOUs) born in 1973 to a brand new database. Technical solutions that can truly achieve direct shareholding already exist, and a few teams have already put them into practice. However, other participants in the industry are willing to act as a new generation of intermediaries - because the intermediary business is their real source of profit.