Unless tokenized securities will somehow make private investments accessible to non-accredited investors, this initiative seems to be entirely missing the elephant in the room, at least in the US.
There was an article on how cut-throat (pun intended) low the margins are for money laundering in the competition between businesses to get drug trafficked US dollars from Mexico to China.
And conversely, if the US government doesn't want you as a shareholder (and by extension US financial institutions can't serve you), good luck to anyone trying to (knowingly or negligently) redeem any VOO that you've touched.
There's a reason real estate is one of the more popular ways for chinese nationals to move large amounts of money abroad, it's one of the less restricted ways to move large sums of money out of the country. So there's a lot of interest in expensive real estate not for occupation but just to buy to get cash out of the country into a stable asset that can be sold or borrowed against.
The big institutions can measure their profits in terms of settlement time, going from 2 days to 1 day (previous infrastructure upgrades) to instantaneous (this) makes them more money.
In the EU, as far as I remember most modern brokers let you buy shares with unsettled proceeds of others without restrictions; in the US, getting a margin account takes no effort at all and bypasses the freeriding rules too.
It actually gets retail investors better prices than institutional or professional ones, since the counterparty can safely assume that there's "dumb money" on the other side of the trade.
That's not to say it's not controversial in some aspects, but it's not as simple a situation as you make it out to be.
Also, somewhat ironically, the front running risk on many decentralized exchanges is much higher due to MEV being a hard problem to solve trustlessly.
Or how you see big institutions making more money by reducing settlement time?