Tokenization of Finance: A Hypothetical Blueprint for the Transformation of the U.S. Capital Market

Author: 0xLeoDeng, Partner and Head of Investments at LK Ventures

On December 4th, SEC Chairman Paul Atkins shared a vision during an interview on Fox Business’s “Mornings with Maria” that “the entire US financial market could migrate on-chain within two years.” This sounds so radical it borders on science fiction.

But if we set aside doubts about the timeline and treat this as a serious future scenario: if this really happens, what would the US economy look like after being reshaped?

This is not a simple technical upgrade, but a complete reformatting of the financial operating system at its core. Here are seven structural transformations that would occur:

1. Market Structure: An “Ultrafast Machine” That Never Sleeps

The first thing to be felt would be the change in the market’s heartbeat.

* The T+0 era of lightning-fast capital turnover. Traditional T+1/T+2 settlement cycles would become history. Trading equals settlement, and funds would almost never be held up. This means the velocity of money would increase significantly, and the cost of capital utilization across the entire economy would be structurally compressed.

* The disappearance of the “closing bell.” Markets would operate 24/7, just like today’s cryptocurrency markets. This also means that the transmission of sentiment and volatility would no longer be physically segmented. The previous “market closes, let’s talk tomorrow” buffer period would vanish, and any good news or black swan event from anywhere in the world would impact asset prices in milliseconds.

* SEC regulation becomes “real-time cruising.” On-chain means absolute transparency. Who is building positions, who is naked short selling, where liquidity is drying up—regulators would no longer rely on delayed reports, but directly monitor on-chain data. For manipulators, this is a nightmare; for the market, this is a new fairness brought by “embedded regulation.”

2. Banking: From “Black Box” to “Glass House”

The impact of going on-chain on the commercial banking system is far deeper than on exchanges.

* “Semi-public” balance sheets. When treasury bonds and credit assets are tokenized, both regulators and the market can instantly see a bank’s liquidity and collateral quality.

* Double-edged sword effect: Asset mismatch risks like those at SVB (Silicon Valley Bank) can be warned about earlier; but on the other hand, in a highly transparent world, the spread of fear faces no resistance, and “bank runs” could happen more decisively and fatally.

* Everything can be collateralized: Corporate accounts receivable, inventory, and even future cash flows can be turned into standardized on-chain collateral through smart contracts. Financing efficiency will be unprecedentedly improved, but regulatory focus must shift from single “on-balance-sheet loans” to monitoring those complex “programmable leverages” on-chain.

3. Real Economy: The “Granularity” Revolution of Capital

This may be an underestimated point—going on-chain will bring about the “democratization of assets.”

* “Micro IPOs” for small and medium-sized enterprises. Just as internet advertising allows small businesses to reach users, on-chain finance gives SMEs the opportunity to issue compliant “micro-securities.” Fundraising will no longer be the privilege of giants, and the capillaries of capital will penetrate deeper into the grassroots economy via blockchain.

* Liquidity release of non-standard assets. An office building, a power plant, or even patent rights—previously only accessible to large institutions. In the future, these can be fractionalized, and global investors can buy one ten-thousandth of a share just like buying stocks.

For the US, this means that its domestic stock of assets will gain a huge “liquidity premium,” attracting global capital to flow in proactively.

4. Geopolitics: The “Digital Reinforcement” of Dollar Hegemony

Many mistakenly believe that “going on-chain” means decentralization and a weakening of national power, but in fact, it’s quite the opposite.

If the US takes the lead in tokenizing treasury bonds and money market funds (MMF), allowing global capital to buy dollar assets at the lowest cost, fastest speed, and with no access barriers—this will be the strongest moat for dollar hegemony.

By contrast, if regulatory and infrastructure development in European and Asian markets cannot keep pace, capital will vote with its feet, flooding into the more efficient and transparent on-chain dollar system. This is not the decline of the dollar, but rather a “generational upgrade of monetary infrastructure.”

5. Risk Reconstruction: Crises Won’t Disappear, They’ll “Mutate”

Financial crises in the on-chain era will take on entirely new forms.

* From “human panic” to “code failures.” Bugs in smart contracts, manipulation of oracles, collapses of cross-chain bridges, and chain reactions from automated liquidations will become new sources of systemic risk.

* The “pressure cooker” effect of crises. Future crises will be more “technical” and more “concentrated.” They may erupt and end within minutes, rather than spreading over months like in 2008. Bailouts will no longer rely on “weekend negotiations,” but on “data-driven decisions” and “code patches.”

6. Winners and Losers: A Reshuffling of Ecological Niches

Potential winners:
– Infrastructure builders: on-chain custodians, identity authentication (DID), and compliant oracle service providers.
– The new generation of investment banks: large asset management institutions that know how to match on-chain assets globally.
– Hybrid talents: rare professionals who understand both financial compliance and can read Solidity code.

Transformation pain points:
– Traditional intermediaries: clearinghouses, transfer agents, brokers who profit from information asymmetry—if they don’t revolutionize themselves, they will be replaced by smart contracts.
– Gray industries: any sector relying on opaque, non-compliant capital flows will have nowhere to hide under fully traceable on-chain regulation.

7. Sober Reality: The Direction Is Certain, Only the Speed Is Variable

Finally, back to reality. Fully achieving this within two years? Almost impossible.

The bottlenecks of technical throughput, lagging legal frameworks, and the struggles of vested interest groups—these three mountains are hard to move within 24 months.

The more likely path is gradual: starting with treasury bonds, repo markets, and some OTC derivatives, with new and old systems running in parallel, slowly eating away at the old world.

But regardless of speed, the direction pointed out by Paul Atkins is irreversible. This is not just a technological iteration, but an instinctive choice by capital in pursuit of higher efficiency. The future of the US financial market is destined to be on-chain.