Editor | Wu Talks Blockchain
In this episode of Wu Talks, Valentin Gui, the head of Kraken's xStocks business, shared his views on stock tokenization. xStocks is a collaborative project involving Kraken, Backed, and Solana, aimed at providing synthetic exposure backed by real stocks for global users, especially those who cannot directly access the stock market.
Valentin explained how xStocks differentiates itself from competitors like Robinhood, how it responds to global regulatory challenges, and revealed the platform's future expansion plans. He emphasized the open characteristics of xStocks — permissionless, supporting multi-chain deployment, and the alliance-based cooperation model, expressing a long-term vision of becoming a part of the Web3 financial infrastructure.
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Clarifying xStocks background and token collateral mechanism
Ehan: Can you tell us about the origin of the xStocks project? There are questions in the community about the previous project DAOStack and its failed ICO; can you explain what happened at that time and how it affected xStocks?
Valentin: Of course. First, I want to clarify that I am the General Manager of xStocks under Kraken. We collaborate with Backed, which is the issuer of these tokens. I guess the issue you mentioned refers to a company or project that our partner was previously involved in. However, the core reason that attracted us to join xStocks is its robust overall architecture and clear future development direction. The initial collaboration was established among Kraken, Backed, and Solana, and now we are expanding this cooperation mechanism to more centralized exchanges and on-chain ecosystems.
One point we particularly value is that its token issuance model is very rigorous, which can minimize common risks. Unlike many tokens, every token of xStocks is fully collateralized by real stocks on a 1:1 basis and can only be issued after the underlying stocks are truly purchased and held by the custodian. We strongly agree with this 'assets first, tokens later' approach because it ensures that each token has real value backing it.
Why choose stock tokenization: Achieving global financial inclusion through synthetic assets
Ehan: So why did xStocks choose the direction of stock tokenization? What problems does it mainly solve?
Valentin: That's a great question. Essentially, what we want to solve is enabling users and investors to access the stock market in an on-chain way, especially those who previously had no channel to buy stocks. One of Kraken's missions is to promote global financial inclusion, and we are particularly focused on how to allow more people to access traditional assets like the US stock market through tokenization.
Of course, users are not actually buying these stocks; they do not have rights to the stocks themselves but gain a 'synthetic exposure' linked to the performance of these stocks through the tokens. That means they can benefit from stock price fluctuations without holding the actual stocks.
Kraken's layout and collaboration on RWA have facilitated the implementation of xStocks
Ehan: xStocks has received strong support from Kraken; how was this collaboration established? How does it achieve widespread circulation on centralized exchanges and DeFi platforms?
Valentin: That's a good question. I can elaborate on Kraken's part, as I am a key participant in this collaboration. Kraken has always hoped to participate more in the RWA (Real World Assets) space, bringing these traditional assets on-chain. When evaluating which RWAs are suitable for tokenization, we focused on stock-type assets — because stocks are widely recognized globally and users are familiar with them. However, many people have no way to directly buy stocks, so we considered whether we could provide a 'synthetic token' approach that allows users to gain the benefits of stock performance without actually owning the stocks themselves.
Initially, we considered whether to issue tokens directly ourselves, but after communicating with multiple companies, we ultimately decided to collaborate with Backed because they already have a complete set of mature processes. Solana also joined us at this stage, and the three of us built a complete cooperation framework.
xStocks can be quickly accepted by other centralized exchanges and decentralized exchanges largely because our cooperation mechanism is very open. Kraken is the first centralized exchange to go live, but other platforms can also directly approach Backed to sign agreements and issue xStocks tokens independently. Kraken has no 'privilege'; we are just the first participant. This open, alliance-style cooperation model is key to the rapid expansion of xStocks.
Key differences with Robinhood: Openness and multi-chain circulation
Ehan: Some people may compare xStocks with existing platforms like Robinhood, what makes you different?
Valentin: That's a great question. Robinhood also launched its own stock tokenization product in early July. But the core difference between the two is that xStocks is permissionless, while Robinhood's product is closed.
For example, while you can purchase stock tokens on Robinhood, these tokens can only be used within the Robinhood platform and cannot be transferred out or circulated on other chains.
xStocks is completely open. You can self-custody these tokens and transfer them to any DEX or dApp for use; the entire Web3 ecosystem supports it. Moreover, xStocks is multi-chain deployed — it initially launched on Solana, and BNB Chain and Injective are soon to launch; we are also negotiating with several other chains for collaboration. This means users can freely use these tokens across chains without platform restrictions.
Not afraid of competition: Welcoming Binance and Coinbase to participate together
Ehan: Are you worried that leading platforms like Binance or Coinbase will launch similar products?
Valentin: We are not actually worried about competition. Frankly, we hope they will join us in this endeavor. The reason we designed this cooperation mechanism is to make it easy for participants like Binance and Coinbase to join; they just need to negotiate a suitable agreement with our issuance partner Backed.
From the very beginning, we have built xStocks as an open and inclusive alliance. If they are unwilling to join, they can choose to create their own system; we have no objections. But our doors are always open — any institutions willing to participate are welcome. We hope to build this ecosystem into an industry standard to benefit more people.
Addressing liquidity challenges between centralized and decentralized exchanges
Ehan: Some have reported that xStocks lacks sufficient liquidity on centralized exchanges; how will this issue be resolved?
Valentin: That's a good question. At Kraken, we have been very focused on liquidity issues from the start and have made a lot of preparations. Kraken currently does not have serious liquidity issues, mainly due to our strategies in inventory building and asset deployment.
Of course, I have heard that some other DEXs or centralized exchanges have indeed encountered challenges in this area. But we believe that as the whole ecosystem matures, this issue will gradually improve. Backed is also taking measures to enhance liquidity, although you will have to ask them for specific details. But as far as I know, the Backed team and other exchanges involved in the collaboration are actively pushing this forward.
US regulatory challenges: How is xStocks different from the failed attempts of FTX and Binance to tokenize stocks?
Ehan: Let's talk about the regulatory environment in the US. What do you think about the current opportunities and challenges in US regulation? For example, do things like Trump's election and the SEC's policies affect the promotion of xStocks? In the past, attempts like FTX and Binance's tokenized stocks have failed; what is different about xStocks?
Valentin: That's a very good question. Indeed, the current political and regulatory environment in the US, especially under Trump's administration, and the SEC's stance have a significant impact on our strategy.
Currently, xStocks is intentionally not launching in the US, which is a joint decision with our partners. Because there is currently a lack of a clear regulatory framework in the US, we have not obtained the relevant compliance licenses. Therefore, Kraken will not provide this service to US users, and the entire product is not available in the US.
Of course, we are actively communicating with regulatory agencies, hoping to find a viable compliance path in the future. But until then, xStocks will not be available in the US market. We do not want to follow the old path of failure due to regulatory issues.
Following securities regulations: xStocks will launch in Europe through the Cyprus entity
Ehan: Hester Peirce mentioned today that any tokenized securities must comply with existing securities laws. What impact will this have on xStocks?
Valentin: There will definitely be. Kraken places great importance on compliance issues, regardless of when or how we launch, we take compliance seriously. For example, in Europe, we will launch xStocks in the next few days, but it will be done through an entity set up in Cyprus.
This entity has obtained approval from the Cyprus Securities and Exchange Commission (CySEC) and is authorized as a licensed financial intermediary under MiFID II (EU Markets in Financial Instruments Directive). Therefore, xStocks will be offered in Europe as a compliant MiFID II product.
This is also why we have not launched in the US yet — there is no clear regulatory framework in the US, nor do we have the necessary approvals. We will consider launching xStocks in the US only after obtaining all necessary compliance licenses.
Main regulatory challenge: How to define the legal attributes of xStocks
Ehan: So what is the biggest regulatory obstacle facing xStocks right now?
Valentin: The biggest issue is getting regulators — especially in Europe and the US — to truly understand what xStocks is and how it should be classified.
Currently, there are three possible classification methods: one is digital assets, one is debt instruments, and the other is securities. Different countries' regulatory agencies may have different interpretations and judgments.
Therefore, in every communication with regulatory agencies, we must engage in additional discussions around this classification issue. At the same time, they will also raise many questions about the operational mechanisms of xStocks and how to protect investor rights. Kraken takes this very seriously, which is also a core part of our ongoing dialogue with regulatory agencies.
Exploring opportunities for Pre-IPO equity tokenization
Ehan: Pre-IPO equity is a very exciting field. Does xStocks plan to enter this space?
Valentin: This is indeed a direction we are very interested in and are already actively discussing. I cannot disclose too many details yet, but we are closely monitoring relevant opportunities and hope to have more content to share in the coming weeks.
xStocks' 2025 roadmap: Global expansion, enhancing token usability, expanding product offerings
Ehan: Can you elaborate on the development plans for xStocks moving forward?
Valentin: Of course. One of our key goals this year is to continue expanding market coverage. Currently, xStocks has already launched in Asia, Africa, and Latin America, and we hope to launch in Europe soon. We also hope to enter the US market by the end of this year. This is something we are prioritizing.
At the same time, we are also working to enhance the usability of these tokens, such as supporting leveraged trading and allowing users to use these tokens as collateral for lending and other financial activities. These features will greatly enrich user scenarios and make assets more dynamic.
Additionally, we plan to significantly expand the coverage of the tokens. Currently, we have launched about 61 tokens and hope to raise this number to several hundred by the end of the year.
The potential of perpetual contracts and derivatives in tokenized stocks
Ehan: What do you think about launching perpetual contracts for tokenized stocks?
Valentin: This is a very noteworthy field. When we talk about derivatives, such as leveraged trading, options trading, perpetual contracts will undoubtedly play an important role in this system. This is also one of the directions we are actively exploring this year.
Growth prospects: Global demand for tokenized stocks drives ongoing expansion
Ehan: Do you expect significant growth in this market in the future?
Valentin: Of course. In fact, growth is already quite fast now. The total market capitalization of global stocks is in the tens of trillions of dollars, and we have observed a very strong demand from users for on-chain exposure to these assets. As we continue to move more stock assets on-chain with our partner Backed and provide them for user access, we expect this field to continue to grow steadily.
Platforms like Robinhood have also begun entering this field, which itself indicates that the overall market for tokenized stocks is continuously expanding.
Collaboration with Gate.io and potential partnerships with platforms like Hyperliquid
Ehan: Has Gate.io also launched similar products? Are you collaborating with platforms like Hyperliquid?
Valentin: You mentioned Gate.io; that's right, they are also part of our alliance now. They have already launched xStocks, and we are very pleased to participate in this collaboration. This is a very important part of our broader market expansion strategy.
As for Hyperliquid, I cannot comment specifically at this time. I hope to have more publicly available news in the coming weeks. We are discussing collaborations with multiple platforms in the ecosystem, some of which are still in negotiation or have not officially launched, so I won't name them before they are officially confirmed.
Discussing potential collaboration with the Trump family project
Ehan: Will the Trump family project participate in stock tokenization? Have you had any communication or discussions with them?
Valentin: We have indeed had some communications, and currently, some work is being advanced in this direction. Although there are no publicly available new developments yet, we know they are interested in exploring the tokenization field.
IPO and token issuance: Possible paths for Backed's future development
Ehan: Looking ahead, does xStocks lean more towards issuing its own tokens or following the traditional IPO path?
Valentin: I believe xStocks — more accurately, Backed as the issuer — will most likely choose the traditional IPO path. But this question is actually more suitable for Backed's team; I will ensure they have the opportunity to respond to this topic later.
Will tokenized stocks replace traditional stocks?
Ehan: Do you think stock tokenization could completely replace traditional stock markets in the future?
Valentin: I don't think it will completely replace traditional stock markets. Traditional stocks still have many important use cases — at least from Kraken's perspective. We are excited about xStocks and tokenized stocks because they can complement traditional stocks, providing investors with a more complete and richer product portfolio and usage methods. That's what makes this track truly exciting.
Is it possible that tokenized stocks could completely replace traditional stocks? Maybe, but a more likely scenario is that the two will merge, ultimately forming a new entity that combines the advantages of both models.
Expanding markets beyond the US: Exploring tokenization of the Hong Kong and Chinese stock markets
Ehan: Is there a possibility of launching products outside of US stocks, such as Hong Kong stocks or Chinese stocks?
Valentin: That is certainly possible. We have discussed this topic with the Backed team. As long as they can obtain the relevant underlying stocks in a compliant and transparent manner, there is no technical barrier preventing us from launching stocks from Hong Kong, China, or other markets.
Building a cross-chain ecosystem: Enhancing the practicality of tokenized stocks
Ehan: Is there anything else you would like to share with our audience?
Valentin: There certainly is. What excites us most right now is the future potential of xStocks. As I mentioned earlier, Kraken is a partner in this project, and we are actively supporting Backed, Solana, and other upcoming blockchain networks. At the same time, we are pushing for more centralized exchanges to join the collaboration, hoping that xStocks will become one of the industry standards in the field of tokenized stocks.
Once this standard is established, we can provide investors and users with the best liquidity and a seamless experience across chains and exchanges. This is exactly why we adopted an alliance and open cooperation model from the very beginning.
More tokenized stocks will be launched in the future, and we will continue to explore new use cases to enhance the usage scenarios of these tokens. As the application scenarios expand, demand will also grow.
The key to driving the widespread adoption of tokenized stocks: Accessibility
Ehan: Looking ahead to the next two or three years, what do you think is the biggest driving force for the widespread adoption of tokenized stocks?
Valentin: I think the key is 'accessibility' — ensuring that any user can acquire tokenized stocks with one click. What excites us about tokenized stocks is that people already have a basic understanding of 'stocks,' even if they are not deep users of crypto. And when you tell them this is actually a tokenized representation of a US stock that can provide synthetic returns linked to stock performance, they can quickly understand.
We believe that lowering the barriers to entry and enhancing the usability of token stocks will bring more users into the crypto world, thereby expanding the entire market. Therefore, from promoting the popularization of token stocks to facilitating the growth of the entire crypto industry, 'accessibility' will be a core driver.
Long-term vision: xStocks will become the underlying infrastructure of Web3 finance
Ehan: What is your long-term vision for xStocks? Is it more like infrastructure for the entire Web3 financial system, or a product centered around retail users?
Valentin: We do position it as infrastructure for the financial services system. At Kraken, when planning our future roadmap, we do not strictly differentiate between traditional stocks and tokenized stocks — we will provide both. Our focus is on how to combine the two to bring new and valuable experiences to end users.
In many cases, we believe tokenized stocks will gradually become the default way for users to gain exposure to US stocks or international equities. This is exactly the path xStocks is taking towards infrastructure evolution — from the user's perspective, they may no longer care whether they hold a tokenized version or traditional stocks.
Of course, we must also remain cautious. Currently, tokenized stocks do not grant users ownership of the underlying stocks, but from a practicality standpoint, tokenized stocks have many unique advantages, which is why they are so appealing.
Market perception misconceptions: Underestimating the global demand and market size for tokenized stocks
Ehan: What do you think is the biggest misunderstanding about tokenized stocks among most people — even some venture capital firms?
Valentin: I think they have underestimated how big this market can be. From my observations in the US, many investors, especially those in the US or the western hemisphere, are not truly aware of the strong demand for obtaining stock exposure globally. There are many users around the world eager to invest in US stocks or other international market stocks.
Tokenized stocks provide a new path for these users to gain relevant performance benefits in the form of synthetic assets. This potential is currently overlooked by many. In fact, the market demand is much broader and deeper than they imagine.
