fragmentation

According to Ledger Insights, the European Securities and Markets Authority (ESMA) recently published the "Trends, Risks, and Vulnerabilities Report for the First Half of 2026," in which digital assets and prediction markets occupy three chapters. Regarding crypto assets, the report warns that the increasing ties between cryptocurrencies and the traditional financial sector pose risks. Concerning tokenization, the report points out that issuing different tokenized versions of the same stock may lead to fragmented liquidity.As for prediction markets, the report believes that prediction markets have not yet seen significant development in Europe. This is because major platforms do not yet hold EU licenses, and in most cases, they need to obtain licenses. The European Securities and Markets Authority (ESMA) outlines some potential advantages of tokenization, including increased efficiency, expanded investor access, programmability, and atomic settlement. On the other hand, ESMA also questions how much these advantages are actually realized within these encapsulated structures.Since the ownership of the underlying stocks is off-chain, there is no single data source on-chain, and self-custody can only be achieved indirectly through these structures. Tokenization structures also introduce additional layers of intermediaries, leading to complexity and risk. The settlement advantages are also difficult to realize. Even if token transfers occur on-chain, the cash portion of the transaction is usually settled separately, whether through bank payments or other channels. This means that for certain transactions, the promised atomic settlement (i.e., simultaneous delivery of securities and cash) has not yet been achieved.

Bitget appeared as a sponsor at the WikiFX exhibition. Bitget CFD Chief Analyst Lewis Huang delivered a speech titled "One Account, Invest Globally: The Cross-Asset Trading Revolution in the UEX Era," pointing out the core pain points faced by active traders today: "Opportunities are global, but capital is fragmented."In response to this situation, Bitget proposed the concept of the panoramic exchange UEX. Lewis Huang stated that what traders need is not more apps, but a highly integrated trading ecosystem. Relying on the Bitget UEX architecture and cross-asset margin mechanism, users only need one account, one KYC verification, and a unified capital pool to configure diverse assets such as cryptocurrencies, U.S. stocks, foreign exchange, precious metals, and global indices. This helps traders quickly seize opportunities when macro trends arise, achieving a global, cross-asset one-stop layout.

Tiger Research's Research Director Ryan Yoon stated that the U.S. Securities and Exchange Commission (SEC) is preparing to launch an "innovation exemption" framework that allows third parties to tokenize listed stocks without the issuer's approval.Ryan Yoon warned that this move could cause two major structural shocks to traditional exchanges: first, liquidity fragmentation, as funds will disperse from centralized exchanges to multiple blockchain platforms; second, revenue fragmentation, as trading fees and intermediary income may flow to overseas or competing platforms, threatening the competitiveness of U.S. finance.He believes that traditional exchanges are like monopolistic superstores, while tokenized stocks are akin to allowing anyone to set up a street stall, which will significantly change the concentration of capital markets. The SEC is advancing this framework at this time to keep global financial income within the domestic regulatory scope.

Pablo Hernandez de Cos, General Manager of the Bank for International Settlements (BIS), stated that global coordination on stablecoin regulation is crucial to prevent severe market fragmentation; otherwise, regulatory differences across jurisdictions could lead to regulatory arbitrage.He pointed out that stablecoins are typically pegged to the US dollar at a 1:1 ratio, which could undermine monetary and fiscal policy, trigger pressures in financial markets, and hinder efforts to combat illegal financing. Currently, the two major stablecoins issued by Tether and Circle account for about 85% of the global circulation of stablecoins, which is approximately $315 billion. He also mentioned that these two types of stablecoins are closer to securities rather than currencies in terms of redemption friction and operate more like ETFs.

According to TheDefiant, a recent study by the data analysis platform RWAio found that the fragmentation of blockchain networks causes a value loss of $600 million to $1.3 billion annually in the RWA market. Currently, the total value of RWA in circulation (including private credit, U.S. Treasury bonds, and commodities) has exceeded $36 billion.RWAio discovered that the same asset often trades at different prices on different blockchains, with price discrepancies ranging from 1% to 3%. Additionally, due to fees and slippage, transferring assets between different chains can result in investors losing 2% to 5% on each transaction. Currently, Ethereum holds 52% of all RWA tokenized value, while Polygon holds 62% of RWA tokenized bonds.According to forecasts, if the market size of tokenized assets reaches $16 trillion to $30 trillion by 2030, annual losses could amount to $30 billion to $75 billion.

The Italian Ministry of Economy announced that it has initiated an "in-depth review" of the current risk prevention mechanisms related to cryptocurrency investments, aiming to assess whether the protections for retail investors in the process of directly or indirectly investing in crypto assets are adequate.This decision was made by the Macroprudential Policy Committee, which consists of the Bank of Italy, the market regulator Consob, the insurance and pension regulator, and the Ministry of Finance. Regulators have warned that as crypto assets become increasingly intertwined with the traditional financial system and the issue of fragmented international regulation intensifies, their potential risks may further rise. Currently, the overall economic and financial situation in Italy remains stable, but it faces high global uncertainty.

ChainCatcher news, according to a blog released by Uniswap Labs, Uniswap Labs has launched "Compact v1," a non-ownership ERC-6909 contract designed to reduce liquidity fragmentation across blockchains by managing "resource locks."The system allows for secure and reusable resource locks between cross-chain networks, providing developers with a shared framework to build customizable and composable systems. Compact v1 includes four core components: the allocator prevents double usage of resources, the arbitrator verifies whether commitment conditions are met, the court acts as the settlement engine for cross-chain exchanges, and the messenger provides backup verification for smart contract wallets. This system will be used to support cross-chain exchanges on UniswapX and has been adopted by the LI.FI and Rhinestone teams.Uniswap stated that the main challenge faced by cross-chain applications is the asynchronicity of different execution environments, which prevents atomic transactions. Compact v1 has undergone multiple independent security audits, and a complete audit report is expected to be released soon, and it has been incorporated into the Uniswap bug bounty program.

ChainCatcher message, independent researcher Chen Jian posted on X that there are currently two main ways to address the fragmentation of Ethereum liquidity. One is chain abstraction, which involves adding another chain on top of all L2s to route transactions, and the other is to solve it in a "cluster" manner, that is, placing a hub below L2 to route transactions, or what is called a shared sequencer.For example, OP Superchain follows this idea, and puffer finance's Based Rollup has a similar approach, but it is more fundamentally native, allowing Native Staking Ethereum layer nodes to receive all Layer2 transactions in advance through AVS-protected pre-confirmation.In fact, technically solving Ethereum fragmentation is relatively easy; the main bottleneck lies in the economic game theory aspect. On one hand, the Ethereum Foundation needs to be more assertive and united, and on the other hand, a balance needs to be found in terms of mutual benefits and win-win scenarios.

ChainCatcher news, according to CryptoSlate, based on a statement from October 7, the crypto investment firm 21Shares has called on the European Securities and Markets Authority (ESMA) to establish standardized regulatory rules for including cryptocurrencies in Undertakings for Collective Investment in Transferable Securities (UCITS) funds. The company pointed out that the current approach lacks consistency, leading to confusion among retail and institutional investors across Europe. For example, Germany and Malta allow UCITS funds to include cryptocurrencies, while Luxembourg and Ireland do not.Mandy Chiu, Head of Financial Products Development at 21Shares, explained that this fragmented approach limits retail investors' ability to fully benefit from cryptocurrencies. She added, "By providing a consistent set of rules across Europe, ESMA can open new avenues for investors to diversify and enhance their portfolios in a regulated environment designed to protect investors." Chiu also noted that clear and consistent rules would help stabilize the market while promoting the growth of the cryptocurrency industry.Therefore, 21Shares urges ESMA to develop comprehensive guidelines that allow all EU member states to invest indirectly in cryptocurrencies. According to 21Shares, this would protect investors and broaden the channels for cryptocurrency investment. It is worth noting that 21Shares' call for regulatory clarity comes as ESMA reviews its recent consultation feedback on including new asset classes, including cryptocurrencies, in UCITS funds.

ChainCatcher news, Uniswap Labs stated that there is a fragmentation issue with intent-based systems, and in collaboration with AcrossProtocol, they proposed the ERC-7683 standard, aimed at addressing this issue through a universal filling network.The ERC-7683 works by having users sign cross-chain orders, user funds being held in a settlement contract, fillers competing to fill orders on the target chain, with the winning filler executing the operation and releasing the funds. Establishing a standard for intent systems will improve the experience for applications, fillers, and users, allowing applications to route intents to a broader network, lowering the entry barrier for fillers, and enabling users to achieve faster fills and lower gas fees. Notably, anyone can implement ERC-7683.

ChainCatcher news, Alex Gluchowski, CEO of Matter Labs, the main developer of ZKsync, believes that as L2s continue to increase, fragmentation is the next major challenge that needs to be addressed in the blockchain space.He stated that the new competition will be between projects providing interoperability solutions, "more specifically, the Superchain from Optimism and the Elastic Chain from Matter Labs, as they are the only two ecosystems in blockchain that actually implement interoperability." Gluchowski expressed skepticism about whether Optimism's interoperability plans would be easily achievable without upgrading its system to incorporate zero-knowledge proofs, "these are complex technologies."Gluchowski mentioned that L2 chains need to be redefined and viewed as useful for specific use cases, "the real question is, do we have significant L2s? I don't think we need too many general-purpose L2s, but we do need some application-specific L2s or community-specific L2s."