A firm founded by billionaire investor Ken Griffin has raised alarms about new blockchain-based financial products, arguing they could tilt the playing field and siphon liquidity from stocks. The warning arrives as digital assets and tokenized markets gain traction with traders and some traditional institutions.
The firm says these products risk creating unfair advantages and weakening price discovery in equities. The comments reflect ongoing tension between established market makers and crypto-focused platforms as trading shifts across asset classes.
Background: A Clash Over Market Structure
Ken Griffin is the founder of one of the most prominent players in modern market-making. His firm processes a large share of retail equity order flow and is deeply tied to how U.S. stocks trade. The organization’s view on market design carries weight with exchanges, brokers, and regulators.
Blockchain-based products span several ideas. They include tokenized versions of traditional securities, crypto-native assets, and new venues that settle trades on distributed ledgers. Supporters say these tools promise faster settlement and broader access. Critics counter that they can fragment liquidity and create pricing gaps.
Equity markets rely on tight spreads, deep order books, and clear rules for routing orders. When liquidity is split between venues with different rules and latencies, spreads can widen and execution can worsen. That is the crux of the firm’s concern.
The Firm’s Argument
“Founded by billionaire Ken Griffin, the firm argued that these blockchain-based products could create unfair advantages and drain liquidity from traditional equity markets.”
The statement points to two risks. First, that some participants could gain an edge from faster or less transparent venues. Second, that volume could move away from public exchanges, reducing the quality of price discovery for stocks.
- Liquidity could fragment across incompatible systems.
- Order routing might favor venues with limited oversight.
- Retail investors could face weaker execution quality.
Industry Response and Counterpoints
Digital-asset advocates argue that new rails can lower costs and speed up settlement. They say tokenization can reduce counterparty risk and cut back-office errors. Some point to experiments with same-day or instant settlement as proof that efficiency gains are real.
Traditional market participants respond that faster settlement can increase collateral needs and margin calls in stressed markets. They warn that shifting activity to private or semi-private chains can hide quotes from the public eye. That could leave displayed markets thinner and more volatile.
Several market-structure experts urge a middle path. They suggest pilot programs with clear transparency rules, stress tests for settlement, and consistent surveillance across venues. They add that parity in best-execution standards is key if both systems are to coexist.
What’s At Stake for Investors
For everyday investors, execution quality is central. If liquidity moves away from public markets, spreads could widen and prices may not reflect full supply and demand. Professional traders might adapt quickly. Smaller investors may not.
Brokers face operational choices. They must decide how to route orders when liquidity is split. That raises questions about best execution, price improvement, and conflicts of interest. Regulators will watch these decisions closely.
Exchanges could lose market share if tokenized venues attract volume with lower fees or faster settlement. Yet they might also adopt ledger-based tools themselves. The result could be a patchwork of systems that compete on speed, cost, and transparency.
Path Forward and Policy Questions
Policymakers will likely focus on a few core issues. They include consistent disclosure, surveillance, and market access standards. They may also weigh capital rules to manage faster settlement risks.
Clear definitions matter. If a tokenized product mirrors a stock, it may need the same investor protections. If it functions more like a derivative or a digital commodity, different rules could apply. Market participants want clarity to avoid regulatory arbitrage.
The warning from the firm founded by Ken Griffin highlights a key divide over the future of trading. Supporters of blockchain-based products see efficiency and new access. Critics see fragmentation and weaker price discovery. The next phase will hinge on pilot programs, data, and rulemaking. Investors should watch how liquidity, spreads, and execution quality change as new products roll out.
