Author: Hedy Wang, Co-founder and CEO of Block Street
The stock market continues to operate on outdated tracks—batch filings, email reconciliations, and slow collateral transfers crawl between custodians through workflows that no one can fully control.
If the industry wants to maintain credibility, it can no longer tolerate this situation. The answer is not another incremental patch or painful niche option. Instead, it is an upgrade to on-chain stock lending. Real-time settlement, programmable collateral, and transparent rule execution will become the benchmarks that others must meet.
Stocks rely on factors such as certainty and speed. However, the systems that support them still lead to settlement delays, recall stagnation, and reconciliation traps caused by corporate actions.
The on-chain track eliminates this friction by securely settling transactions instantly, removing the delays and risk exposures brought about by today's process plague. Smart contracts then automatically handle daily tasks without endless back-and-forth communication.
Global regulators and market architects have already laid the groundwork for tokenized settlement supported by central bank currencies and tokenized deposits. These are the "cash" ends of each transaction that ensure the safety and finality of financing.
Even the World Economic Forum's overview emphasizes that as tokenization moves from theory to reality, issuance and securities financing use cases are transitioning from pilot to production. The time for progress is now, as demand remains the mother of invention.
In today's stock lending systems, risks are often discovered too late through endless reconciliations and back-office checks, but by then, the problems have already spread. Rather than reacting post-trade, rules should be executed in advance so that loans are only approved when conditions are right. This is akin to ensuring that risk exposure limits, recall periods, and the like are met in advance.
Manual exception roulette can now be eliminated, and the cash end can become more robust, as demonstrated by a 2025 study that found policy execution on a programmable track to be sustainable. If monetary operations can be safely automated, so can the stock financing rule set.
The Bank for International Settlements (BIS) report explicitly outlines tokenized reserves, commercial bank money, and government bonds, which reside on a settlement platform that is conditional, atomic, and programmable.
This direction of market movement aligns with the broader consensus that has emerged this year. Future systems will be characterized by tokenized assets and currencies operating under public law supervision, rather than a distinction between cryptocurrencies and fiat currencies.
Skeptics point out that regulation is akin to roadblocks, but that is not the case. It is more like a metered green light. Europe's blockchain market infrastructure regulatory sandbox proves this. It is a real-time regulatory space for genuine exemptions and reporting offline operations, laying the groundwork for the future of stock lending.
It showcases functional models, legal guardrails for regulators' applications, and the next steps in rule development. This is precisely the technology stack that the stock lending pipeline needs to connect as it naturally transitions to its on-chain evolution path.
Nevertheless, this does not overlook the challenges the industry faces, such as fragmentation and confidentiality, which must be adequately addressed.
These issues are resolved through permissioned networks that handle Know Your Customer (KYC) and whitelist constraints, zero-knowledge proofs that protect borrower and owner information, and standardized collateral tokenization that keeps risk exposure precise and auditable.
Stock lending that remains stuck in outdated batch windows will continue to fail in two aspects: foundational efficiency and market trust. Settlement delays not only erode returns but also amplify counterparty risk, exposing participants to risk when precision should be the standard. In contrast, on-chain stock lending not only improves processes; it transforms them. It enforces transparency by design, compresses systemic risk, and restores the real-time value of capital to the millisecond.
We are no longer talking about theory. The market is already shifting in this direction. Regulatory frameworks are keeping pace, pilots are proving the model's effectiveness, and institutional demand is growing. The decision is no longer abstract. Stock lending belongs on-chain, or it will be left behind.
Author: Hedy Wang, Co-founder and CEO of Block Street.
Related: Detailed Explanation of Hong Kong's New Regulations: Intermediaries in Virtual Assets, Red Lines and Dividends Flying Together
This article is for general informational purposes only and is not intended as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Original: “Opinion: Stock Lending Must Go On-Chain or Be Left Behind by the Times”
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