Two major exchanges join forces with Backed Finance to launch 60 tokenized stocks
Cryptocurrency exchanges Bybit and Kraken announced the formal launch of tokenized stock trading services on Monday, providing global investors with tokenized versions of over 60 U.S. stocks and ETFs through the xStocks platform developed by Swiss company Backed Finance. This service covers stocks from well-known companies such as Apple, Amazon, Microsoft, Tesla, Nvidia, as well as consumer brands like Netflix, Meta, and McDonald's, and supports 24/7 trading.
Image source: xStocks Bybit and Kraken announce the launch of tokenized stock trading services on the xStocks platform developed by Backed Finance
Bybit states that tokenized stocks will be backed by real stocks on a one-to-one basis and will provide near-instant on-chain settlement services. It also emphasizes that its services comply with the EU's Markets in Financial Instruments Directive II (MiFID II) regulations and considers future support for dividend distribution features. These tokenized stocks will also be available on Bybit's TradFi and Byreal platforms, specifically catering to hybrid and traditional asset trading needs.
Kraken, as one of the oldest cryptocurrency exchanges in history, also announced support for the xStocks service.
Arjun Sethi, co-CEO of Kraken, stated: 'With xStocks, we are not launching a novelty product, but unlocking fundamental functionality. For the first time, people around the world can own and use tokenized stocks just like using currency. You can transfer, hold, consume, or mortgage them, all completed through a wallet, without intermediaries, without borders, and without delay.'
Integrating Solana DeFi ecosystem, stock tokens enter decentralized finance
A key feature of the xStocks platform is its deep integration with the Solana blockchain, allowing tokenized stocks to participate directly in the decentralized finance (DeFi) ecosystem. According to Backed Finance's announcement, xStocks has completed integrations with major Solana DeFi protocols, including Kamino, Raydium, and Jupiter, enabling users to provide liquidity, trade, and exchange stock tokens on these platforms.
Solana's Phantom wallet has also added support for xStocks, although full functionality is still being rolled out. According to DefiLlama data, the total locked value of the Solana DeFi ecosystem currently reaches $8.64 billion, and the addition of stock tokens will bring a new asset class and use cases to this ecosystem.
Image source: DefiLlama The total locked value of the Solana DeFi ecosystem currently reaches $8.64 billion
Adam Levi, co-founder of Backed Finance, stated: 'xStocks represents a significant leap forward in the democratization of financial markets. By bringing familiar assets to the blockchain with unprecedented accessibility, we are not only bridging traditional finance and DeFi, but also building the infrastructure for a truly open, efficient, and inclusive global financial system, allowing everyone to participate in wealth creation.'
Targeting investors outside the U.S., providing convenient pathways for U.S. stock investments
The xStocks service primarily targets investors outside the U.S., providing them with a more convenient way to invest in U.S. stocks. For non-U.S. investors, this service promises a simpler path for investing in fractional U.S. stocks, while cryptocurrency users can hold these Solana-based assets directly in their wallets, managing them alongside other digital assets.
Kraken waives trading fees for users paying with U.S. dollars or $USDG stablecoin, but still charges spread fees. However, token holders do not directly own the underlying stocks, and dividends will be converted into additional token holdings instead of cash payments, with these tokens backed one-to-one by real stocks held by Backed.
Despite claims to eliminate intermediaries, tokenized stocks actually introduce different types of intermediaries and additional risks. Kraken's terms of service emphasize that users face risks associated with the exchange's own operations and technology, the financial stability of Backed, potential counterparty default, legal complexities, and liquidity constraints. The market size of tokenized versions is inevitably smaller than that of actual stock markets, which may be difficult to sell when needed.
The tokenized asset market continues to heat up, and risk management remains cautious
The launch of this service comes at a time when the trend of tokenizing traditional financial instruments is on the rise. Cryptocurrency exchanges like Coinbase and Gemini are seeking to expand their functionalities into the tokenized securities trading industry, while Robinhood is also developing tokenized U.S. stock services for EU users. The xStocks alliance led by Backed Finance brings together multiple exchanges and DeFi applications, aiming to create an open, on-chain market for real-world assets.
Extended Reading
Buy before IPO! Robinhood launches on-chain U.S. stocks, allowing you to acquire OpenAI equity tokens
To ensure transparency, Backed provides proof via Chainlink's proof of reserve system and connects with custodians through an API. The verification service is provided by Network Firm, an accounting service company focused on cryptocurrencies. However, effective verification requires independence, and when the proof company becomes overly specialized in a particular industry, it may face pressure to maintain client relationships rather than pose strict challenges.
Nevertheless, the implementation of a proof of reserve system represents a significant advancement in transparency for the industry's maturation process. Compared to the early questionable quality of tokenized stock products in 2018, the quality of the latest versions of the tokenized stock market has significantly improved, but investors still need to weigh the convenience advantages against additional risk levels.
The article 'Two Major Exchanges Launch On-Chain U.S. Stocks! 60 Tokenized Stocks Available for Purchase by Global Users' was first published in 'Crypto City'
