One, introduction and background.
Over the past year, the concept of tokenization of real-world assets (RWA) has gradually shifted from the fringe narratives of fintech to the mainstream view of the crypto market. Whether in the widespread application of stablecoins in payment and settlement or the rapid growth of on-chain government bonds and bills, the 'traditional assets on-chain' vision has transformed from an idealized dream into a practical experiment. In this trend, the stock tokenization known as 'US stocks on-chain' has become one of the most controversial yet promising tracks. It carries not only attempts to transform the liquidity and trading timeliness of traditional securities markets but also challenges to regulatory boundaries and opens up cross-market arbitrage opportunities. For the crypto industry, this could represent a generational leap that brings trillion-dollar asset pools into the on-chain world; for traditional finance, it feels more like a 'licensed' technological breakthrough, bringing efficiency revolutions while also sowing governance conflicts.
Two, current market situation & key pathways.
Although 'tokenization' has become one of the most important mid-to-long-term narratives in the crypto industry, its progress in landing specifically on 'stocks' remains slow, with significant path differentiation. Unlike standardized assets such as government bonds, short-term bills, and gold, stock tokenization involves more complex legal ownership issues, trading timeliness, voting rights design, and dividend distribution mechanisms, which has led to clear distinctions in compliance pathways, financial structures, and on-chain implementation methods among the various products currently in the market.
A project that achieved early results in this field is Backed Finance. This Swiss fintech company launched several ERC-20 tokens backed by real stocks and ETFs through partnerships with regulated securities custodians, attempting to establish an 'intermediate bridge for on-chain securities.' Taking its well-known product wbCOIN as an example, this token claims to be 1:1 linked to real shares of Coinbase on Nasdaq, with custodians Alpaca Securities and InCore Bank promising redemption for real stocks, theoretically possessing a 'subscription-hold-redeem' closed-loop logic. Backed has also launched multiple tokens based on NVIDIA (BNVDA), Tesla (BTESLA), S&P 500 ETF (BSPY), etc., using chains like Base and Polygon as circulation vehicles, providing investors with on-chain trading access. However, there remains a gap between ideals and reality. As of March 2025, the total TVL of various stock token products launched by Backed had not exceeded $10 million, and the average daily trading volume of wbCOIN was even below $4,000, with transaction records approaching zero during most time periods. The reasons for this situation are not singular; there are uncertainties from early users regarding the redemption mechanism, the DeFi ecosystem has not fully integrated these tokens, and some on-chain market makers judge that such assets 'lack long-term liquidity expectations.' This means that even if the product mechanism has achieved clear asset mapping and a complete custody chain, a lack of trading depth, use cases, and user awareness may still lead to the tokenized US stocks falling into a 'compliant but quiet' predicament.
Compared to Backed, Robinhood's tokenization path appears more conservative but systematic. As a platform that has long cautiously laid out its crypto business, Robinhood chose to launch regulated stock derivative tokens in the EU, which are essentially not mappings of real stocks, but price-tracking derivative instruments based on the EU MFT (Multilateral Trading Facility) license. Its underlying logic is closer to traditional CFDs (Contracts for Difference), where traders do not actually hold the underlying stocks, but hold rights and obligations against price fluctuations. Although this design sacrifices the on-chain purity of '1:1 anchoring to real stocks,' it significantly reduces regulatory conflicts and custody complexity, achieving a 'non-security but tradable' compromise. Robinhood provides complete UI support, asset splitting, dividend distribution, leverage settings, and protects user rights through its own custodial account system; more importantly, its future plans to launch a Layer-2 network (tentatively named Robinhood Chain) also indicate that Robinhood is embedding tokenized stocks into its native wallet and crypto trading platform in an 'application chain' manner. This top-down constructed closed-loop ecosystem may be more suitable for onboarding new users, but it also limits the openness of asset circulation, and current trading hours are still restricted by the opening hours of the European financial market, meaning the on-chain native nature is still insufficient.
In contrast, the xStocks ecosystem launched by Kraken and its partners offers another imaginative path. This solution is based on the Solana chain, with Backed providing the underlying asset tokens, and it bypasses US regulations through structured compliance, opening the product to the global non-US market. The most distinctive feature of xStocks is its 'DeFi-ification' of trading attributes: all tokens can be traded 24/7, with T+0 settlement, on-chain swaps, and market-making with stablecoins, theoretically integrating into existing DeFi toolchains like lending, perpetual contracts, and cross-chain liquidity bridging. The system also attempts to gather trading depth through on-chain liquidity pools and establish preliminary connections with Solana-native DEXs like Orca and Jupiter. This on-chain native, globally distributed, and composable property undoubtedly represents the 'ultimate vision' for tokenized stocks, which is not just to create a price mapping product but to build a truly integrated cross-market of traditional financial assets and crypto infrastructure. However, the biggest challenge for xStocks at present remains the limited user coverage, the need for KYC checks for real subscriptions/redemptions, and the lack of clarity on whether its custody path has cross-border legal validity. Moreover, although its trading experience and mechanisms have reached 'crypto-native' standards, the actual user scale and on-chain liquidity have not yet formed a scale effect, and there is still a long way to go to mainstream adoption.
From the differences in the layout of these three players, it is evident that there is currently no unified standard for stock tokenization, but rather each designs its path based on its own advantages, regulatory environment, and ecological resources. Among them, Robinhood emphasizes 'regulated traditional trading experience plus crypto packaging,' Backed emphasizes 'on-chain tool contracts that map real assets,' while Kraken leans more towards 'building crypto-native liquidity markets.' The different paths of the three not only showcase the diversity of this track but also reveal a typical feature of an immature market: none can fully cover compliance, asset mapping, and user needs, and ultimately still need to be validated by time and market feedback for elimination and selection.
It can be said that tokenized stocks are still in a very early experimental stage. Although they possess a theoretical closed loop, their on-chain activity and financial efficiency are still far below expectations. The key to their future development depends not only on whether the product design is perfect but also on whether three major elements can converge: first, whether more real liquidity participants can enter their trading pool to form a price discovery mechanism; second, whether they can integrate richer DeFi applications to enhance the use cases of tokenized stocks; and third, whether the regulatory boundaries can gradually clarify the red lines, allowing platforms to confidently expand their service scope, especially covering US users. Before these paths are fully integrated, tokenized stocks resemble a financial experiment with immense potential rather than an immediate growth engine that can fulfill the expectations of a bull market.
Three, compliance mechanisms and implementation capabilities.
In all discussions about tokenized stocks, regulation remains the Damocles sword hanging overhead. Stocks, as one of the most tightly regulated financial assets, are subject to strict legal constraints at all stages, including issuance, trading, custody, and settlement, based on the laws of their respective jurisdictions. In traditional finance, securities must be registered or obtain exemptions to be legally sold, and trading venues must obtain licenses such as those for exchanges or ATS (Alternative Trading Systems). Reconstructing these securities as 'on-chain assets' not only requires solving the technical mapping problem but also necessitates connecting to a clear and executable compliance path. Otherwise, even the best-designed products will struggle to break through limitations on usage, promote to qualified investors, or risk illegal securities issuance. In this regard, the choices and differences among various projects are particularly pronounced, and they determine whether they can truly move towards large-scale implementation in the future.
Taking Backed Finance as an example, its compliance pathway adopts an approach closest to 'traditional securities issuance logic.' The stock tokens issued by Backed essentially fall under the category of restricted securities recognized by Swiss regulators, meaning that token purchasers must complete KYC/AML audits and commit not to sell to US investors, while secondary market circulation is also subject to 'qualified investor only' restrictions. Although this approach is relatively robust in compliance, avoiding the red lines of the US SEC, it also brings about circulation restrictions, making it impossible to realize the vision of free trading of tokens on public chains. A more practical challenge is that this 'restricted securities' model requires every transfer to go through compliance verification, significantly weakening its compatibility with DeFi systems. In other words, even if Backed has successfully established a custody mapping relationship between tokens and real stocks with InCore Bank and Alpaca Securities, what it has built remains a 'closed ecosystem within a regulatory sandbox,' difficult to achieve high-frequency trading, collateralization, leverage, and other applications in open financial scenarios.
The path adopted by Robinhood is a more clever compliance packaging. Its tokenized stock products do not directly map to real stocks but are built as 'securities derivatives' under the EU MiFID II regulatory framework, technically similar to Contracts for Difference (CFDs), and provided with pricing, custody, and settlement support by its regulated subsidiary. This design allows Robinhood to avoid the legal responsibilities of directly holding stocks while also sidestepping issues related to counterpart trading and physical delivery, enabling the provision of related product trading without a securities license. The advantage of this path lies in its high compliance certainty, allowing for the rapid launch of multiple stock tokens and promoting them based on its existing user system; however, the cost is that the assets themselves lack programmability and openness, making it impossible to truly embed them within on-chain native financial protocols. Further, this 'platform custody + derivative tracking' model fundamentally belongs to the CeFi (centralized finance) category, where the issuance and settlement of assets rely almost entirely on the internal implementation of the Robinhood system, and user trust in the underlying assets remains based on trust in the platform rather than on-chain autonomy of custody and verification mechanisms.
In the case of Kraken and xStocks, we see a more aggressive, puritanical approach to compliance. The tokenization mechanism behind xStocks is supported by Backed, but it follows a 'on-chain governance + global non-US user access' gray compliance path in terms of circulation and usage. Specifically, this model utilizes the 'restricted securities + private placement' exemption clause in Swiss law, allowing Kraken to open its tokenized products for trading in global non-US markets and restrict access for US IPs through on-chain contracts. This approach avoids direct scrutiny from the SEC and FINRA regarding securities issuance and exchange regulation while retaining the characteristic of free circulation of tokens on-chain, allowing it to connect to DeFi lending protocols, AMM market-making, cross-chain bridging, and other modules, forming a relatively complete financial closed loop. However, the risk of this pathway lies in its extreme reliance on the technical isolation of 'non-US user identities.' If a large number of users circumvent the restrictions, this could still be viewed as 'providing illegal securities to US investors,' triggering enforcement risks. Moreover, US regulatory agencies often do not limit their determination of 'actual market participation' solely to the technical barriers in place but consider behavior outcomes and the actual nationality of investors, meaning that even if Kraken tries its best to avoid it, it might still face regulatory scrutiny or even potential sanctions.
More macroscopically, currently neither Backed, Robinhood, nor Kraken has achieved true global compliance coverage in their tokenized stock solutions. Instead, they are more of a strategy of 'regional arbitrage + operations within legal loopholes.' The fundamental reason for this situation is the significant differences in how countries around the world define the nature of securities. For example, in the United States, the SEC still views 'any token anchored to real equity value' as a security, and its issuance must meet the Howey Test or obtain compliance exemptions through Reg A/Reg D. The EU is relatively lax, allowing some tokens based on derivative structures to trade under MTF or DLT Pilot Regime jurisdiction; countries like Switzerland and Liechtenstein attract project parties for pilot issuance through sandbox regulation and dual registration systems. This regulatory fragmentation creates significant institutional arbitrage space, leading to the situation where tokenized stocks exhibit 'regional compliance and global gray zones.'
In this complex context, the future of stock tokenization achieving large-scale implementation will inevitably depend on breakthroughs in three areas. First is the unification of regulatory cognition and the establishment of exemption channels, which require designing a legal and replicable compliance template for tokenized securities, similar to the EU MiCA, UK FCA sandbox, and Hong Kong VASP. Second, on-chain infrastructure needs native support for compliance modules, including KYC modules, whitelist transfers, on-chain auditing and tracking tools, so that compliant securities can truly be embedded in the DeFi system instead of becoming liquidity islands. The third is the participation of institutional players, especially the coordinated cooperation of custodian banks, audit firms, brokerages, and other financial intermediaries to solve issues of asset authenticity and the credibility of redemption mechanisms.
It can be said that compliance mechanisms are not an ancillary issue to stock tokenization but rather a key variable determining its success or failure. No matter how decentralized a project is, its foundation still rests on the logic of 'whether real assets can be credibly mapped.' The core issue behind this is whether the legal framework can accept the existence of new paradigms. For this reason, when studying tokenized stocks, we cannot focus only on mechanism innovation and technical architecture; we must also understand the boundaries and compromises of institutional evolution, finding a viable middle path between regulatory reality and on-chain ideals.
Four, market analysis and future outlook.
The total amount of RWA (real-world assets) on-chain globally is approximately $17.8 billion, with stock assets only amounting to $15.43 million, accounting for just 0.09% of the total scale. However, tokenized stocks have grown over three times in six months, rising from $50 million to approximately $150 million from July 2024 to March 2025.
When we revisit the actual performance of the tokenized stock track, it is not difficult to find that it possesses both strong conceptual appeal and faces extremely complex practical landing thresholds. From a theoretical perspective, stock tokenization has clear structural advantages: on one hand, it maps the most valuable and recognized real assets on-chain, providing the crypto ecosystem with a credit anchor from the real world; on the other hand, it achieves transaction automation and real-time settlement through smart contracts, overturning the fundamental logic of traditional securities markets relying on centralized clearinghouses and T+2 cycles, releasing extremely high system efficiency. However, in practice, these advantages have not translated into large-scale adoption, and instead have long been in an awkward state of 'established mechanisms, lacking scenarios, and dried-up liquidity.' This also forces us to further ponder: what is the true growth engine of stock tokenization? Is it possible for it to become a core asset category in the crypto finance market like stablecoins or on-chain bonds?
Structurally, the primary value of stock tokenization lies in 'connecting real markets with on-chain markets,' but the true incremental demand must come from three user groups: first, retail investors who wish to bypass traditional financial institutions and participate in the global stock market with lower barriers; second, high-net-worth individuals and gray funds seeking cross-border asset flow, evading capital controls or time zone restrictions; and third, DeFi protocols and market makers targeting arbitrage and structured returns. These three groups together shape the 'potential market' for tokenized stocks, but currently, no single group has truly entered on a large scale. Retail investors often lack on-chain operational experience and confidence in the mechanism of 'whether it can be redeemed for real stocks.' High-net-worth users have not yet confirmed whether these assets provide sufficient privacy protection and hedging attributes, while DeFi protocols are more inclined to construct structured products around high-frequency trading, stablecoins, and derivatives, showing limited interest in low-volatility and low-liquidity stock assets. This means that stock tokenization currently faces a typical market misalignment issue: 'financial assets want to go on-chain, but on-chain users are not yet ready to accept them.'
Even so, future turning points may gradually emerge with several key trends. First, the rise of stablecoins provides a solid monetary foundation for trading and settling tokenized stocks. When USDC, USDT, PYUSD, and other stablecoins become the 'digital dollar' of on-chain liquidity, stock tokens naturally obtain a common trading counterpart asset. This allows users to engage in US stock-related trading without entering the banking system, lowering entry barriers and capital switching costs, which is particularly important for users from developing countries. Second, the maturation of DeFi protocols gradually establishes the ability to combine 'on-chain traditional assets.' With the emergence of tokenized government bonds, tokenized money market funds, and other assets, the market's acceptance of 'on-chain non-crypto native assets' has significantly increased, and stocks are undoubtedly the next standard asset type expected to be integrated. If a future on-chain investment portfolio tool can be created that includes 'stocks + bonds + stablecoins,' it will have a high appeal to institutional users and may even evolve into a 'on-chain ETF/index fund' similar to traditional brokerages.
Another variable that cannot be ignored is the explosion of L2 and application chain ecosystems. As the user base of Ethereum Layer 2 networks like Arbitrum, Base, Scroll, and ZKSync expands, and the financial nativeness of high-performance chains like Solana, Sei, and Sui enhances, the 'on-chain residence' of stock tokens is no longer limited to isolated asset issuance platforms but can be directly deployed on chains with deep liquidity and developer bases. For example, if Robinhood's Robinhood Chain successfully integrates its trading data and capital flow from its hundreds of millions of users, along with the compliance establishment of on-chain wallets and KYC custody tools, it could theoretically construct a hybrid financial model of 'centralized user experience + on-chain asset architecture' within a closed-loop ecosystem, thereby promoting the actual usage frequency and financial complexity of stock tokens. Projects like xStocks in the Solana ecosystem may also gain structural advantages in scenarios focused on arbitrage, perpetual contracts, and segmented investment due to their high-frequency trading capabilities and low fee advantages.
At the same time, from the perspective of macro-financial cycles, the emergence of stock tokenization coincides with the critical phase of further integration between global capital markets and the crypto market. With the approval of Bitcoin ETFs and RWA gradually becoming a focus for traditional institutions' on-chain layout, the crypto world is shifting from an 'island economy' to a 'global asset-compatible system.' In this context, stocks are undoubtedly the most symbolic connection point. Especially as investors seek more flexible, efficient, and 24/7 cross-border allocation tools, tokenized 'US stocks' are likely to become the core springboard for the global flow of capital. This also explains why traditional asset management giants like Franklin Templeton and BlackRock are researching security tokens and on-chain investment funds; their aim is to pave the way for changes in market structure in the next phase.
Of course, in the short term, stock tokenization still cannot escape several practical constraints. Liquidity remains scarce, user education costs are high, compliance pathways are full of uncertainties, and the asset mapping mechanism still carries high trust costs. More importantly, a 'first-mover advantage clear' leading project has yet to emerge, lacking standard asset components like USDC, WBTC, and sDAI. This means that the current market is still in an exploratory phase, with each project trying different ways to overcome the two major challenges of compliance and usability, but standardization and scalability will require time and patience.
However, because of this, stock tokenization may be at a 'seriously underestimated early starting point.' It does not directly assume a monetary function like stablecoins nor does it possess native network effects like ETH or BTC, but its ability to 'map the real world on-chain' is becoming a key puzzle piece connecting the two systems. The projects that truly have explosive potential in the future may not be some new asset but rather a 'compliance integration platform' capable of integrating asset custody, transaction matching, KYC audits, on-chain composition, and off-chain settlement, with the goal of not completely replacing traditional brokerages but becoming a 'Web3 compatible layer' of the global financial system. When such a platform has sufficient user volume and infrastructure support, stock tokenization will not just be a narrative but will become a core component of on-chain capital markets.
Five, conclusions and recommendations.
Looking back at the development trajectory of stock tokenization, we can clearly see a typical cyclical phenomenon of 'technology first, compliance lagging, and the market waiting.' This technology is not a recent invention, nor is it a difficult financial engineering problem to understand; the underlying mechanism logic—mapping real stocks through on-chain assets to achieve global trading and portfolio capabilities 24/7—has sufficient validation in both technology and finance dimensions. However, the real issue is not whether the mechanism itself is feasible, but how this mechanism can find a viable path to take root and expand steadily within the complex regulatory context, financial infrastructure, and market inertia of the real world. In other words, the reason why stock tokenization has not yet formed explosive growth is not that it is not 'good' enough, but that it is not 'mature' enough, not 'usable' enough, and has not truly hit a strategic node where policy windows and financial needs intersect.
But this situation is quietly changing. On one hand, the acceptance of blockchain in traditional capital markets is rapidly increasing, from Blackstone's on-chain fund to JPMorgan's on-chain settlement network, to the RWA infrastructure on Ethereum led by BlackRock, all of which are sending a strong signal: real-world assets are gradually moving on-chain, and future financial infrastructure will no longer be a binary opposition of 'traditional and crypto' but rather a fusion-like middle ground. In this major trend, stocks, as one of the most mature real assets, have a naturally significant value when mapped on-chain. On the other hand, the crypto-native ecosystem itself is also moving from pure speculation to a phase of structural construction, from stablecoins and lending protocols to attempts at on-chain government bonds and ETFs. Users are beginning to demand higher standards of 'stability, liquidity, and compliance' for assets, and the stock asset class can just play a bridging role in this. Not only does it represent the credit foundation of the real world, but it can also be embedded in smart contracts and DeFi modules through tokenization, becoming an important component of on-chain investment portfolios.
Therefore, stock tokenization is not just an 'interesting narrative,' but a mid-to-long-term opportunity track with a real demand foundation, policy gaming space, and technical implementation path. For industry practitioners, there are several clear suggestions.
First, project teams entering the stock tokenization field must prioritize 'designing compliance pathways' as their top priority, rather than focusing on technological innovation or user experience optimization. Projects that genuinely have the opportunity to grow and strengthen will be those that can build a legally compliant issuance structure and on-chain trading mechanism within friendly jurisdictions such as Switzerland, the EU, the UAE, and Hong Kong. Technology is merely a prerequisite; systems set the boundary, and compliance is the moat for growth.
Secondly, the essence of asset tokenization is 'infrastructure-level asset issuance,' meaning its value does not depend on whether a particular stock is popular but on whether the entire system can connect to more on-chain protocols and become a standard asset component. Therefore, tokenized stock projects must actively interface with various DeFi protocols to promote the implementation of composite products like 'rTSLA collateralized loans,' 'aAAPL perpetual contracts,' and 'SPY ETF token re-staking.' Otherwise, even with compliance and custody, they can only become 'conceptual tools' in low-frequency trading scenarios.
Again, user education and product packaging are equally crucial. On-chain stock trading cannot continue to maintain the current high barrier where 'only professional players can understand it.' Instead, it should actively learn from platforms like Robinhood, eToro, and Interactive Brokers, introducing familiar UI language, simplified trading processes, and visualized profit structures to minimize user entry barriers and truly bring traditional investors into the crypto world. For ordinary users, the ability to buy a share of AAPL with an on-chain wallet is far more attractive than understanding whether the underlying custody structure is based on CSD.
Finally, policy participation and regulatory dialogue must be prioritized, especially in regions like Hong Kong, Abu Dhabi, and London that actively promote RWA policy innovation. Industry self-regulatory organizations, technical standard templates, and pilot regulatory sandboxes should be formed. Whether stock tokenization ultimately succeeds depends not on whether more complex asset packaging structures can be built, but on whether policymakers can be convinced that this is a 'controllable, incremental, beneficial financial innovation,' rather than yet another challenge to the existing financial order.
In conclusion, stock tokenization is a topic full of tension. It connects the oldest financial assets with the newest technological paradigms, representing a collective demand for 'capital flow liberalization' and 'financial infrastructure reconstruction.' In the short term, it will still be a test of endurance in regulation, cognition, and trust; but in the long term, it may become the 'third pillar' in the development process of on-chain finance, following stablecoins and on-chain government bonds. This is not a hot topic for speculation but a deep water area, a direction truly worthy of long-term participation and investment over a 3-5 year cycle. If the foundational logic of the next bull market is 'on-chain real economy,' then stock tokenization is likely to be the most concrete, valuable, and regulatory controversial key breakthrough.
For investors & institutions, we suggest considering the following short-term, mid-term, and long-term aspects.
Short-term: Focus on product launch, TVL, market-making mechanisms, on-chain trading data, and regulatory dynamics (such as MiCA and SEC guidelines).
Mid-term: Evaluate whether the platform has joined perpetual contracts, leverage mechanisms, DeFi support, and on-chain indicators such as funding costs and liquidity efficiency.
Long-term: Focus on whether US users can open trading permissions, the integration path of T+0 with compliance mechanisms, and the capital redistribution trends between on-chain funds and altcoins/new assets.
In summary, US stock tokenization is an 'important experiment' in the structural transformation of the crypto market. Although there is currently no explosive trading volume, it is laying the foundational groundwork for the next bull market. If a convergence of compliance openness, on-chain depth, and mechanism innovation can be achieved, this 'old bottle with new wine' may become a key engine driving the next wave of growth in the crypto market.
