Stock tokenization is becoming one of the strongest narratives in the convergence of traditional finance (TradFi) and Web3 by 2025.
According to rwa.xyz data, the market capitalization of tokenized stocks has grown from nearly zero to hundreds of millions this year, thanks to the shift in the model - from early synthetic models to the custody of actual stocks, and is increasingly extending to higher-tier products, such as derivatives.
This article will explain the evolution of this model, highlighting key participants and exploring potential future developments, particularly in the areas of derivatives and liquidity, referred to as the so-called 'second growth curve'.
The journey of US stock tokenization
What is stock tokenization?
In short, it involves mapping traditional stocks to the blockchain in the form of digital tokens, with each token corresponding to one share of the underlying asset. These tokens can be traded on-chain 24/7, breaking through the limitations of traditional market time zones and trading venues, and opening up participation channels for global investors.
Stock tokenization is not a new concept. In the last cycle, projects like Synthetix and Mirror built on-chain synthetic asset systems. Users could mint and trade stock tokens (like TSLA, AAPL) through over-collateralization (like SNX, UST).
This model has since been extended to other assets such as fiat currency, indices, gold, and oil, and settled through oracle pricing and on-chain matching. Because there are no real counterparties (only providing price exposure), theoretically, the system can offer deep liquidity and low slippage trading experiences.
Limitations: Synthetic models do not confer the real ownership of the underlying stocks - they only provide price exposure. Once oracles fail or collateral unpegs (as occurred with the UST incident), these systems may face liquidation, price divergence, and confidence crises.
What will be different in 2025?
The current growth momentum comes from a model where real stocks are held off-chain and on-chain tokens are issued at a 1:1 ratio. This gives rise to two main paths:
Third-party compliant issuance and support for multi-platform access (e.g., Backed Finance / xStocks): xStocks purchases and holds stocks through partners like Alpaca Securities LLC.
Broker-led closed-loop model (Robinhood-style): Licensed brokers purchase stocks themselves and issue tokens, covering the entire process from purchase to on-chain issuance.
The core upgrade lies in verifiable real asset backing. This enhances security and compliance, making the model more acceptable to traditional institutions.
Project panorama: from issuance to trading
A complete stock tokenization ecosystem typically includes:
Infrastructure: Underlying blockchain, oracles, and settlement channels
Issuance: Regulated or compliant issuers
Trading: Centralized exchanges / decentralized exchanges and DeFi (lending and other derivatives platforms)
Infrastructure is gradually maturing, while the most competitive and ultimately decisive segments for user experience and liquidity are mainly concentrated on issuance and trading.
Here are some representative projects.
Ondo Finance - Extending from RWA Bonds to Stocks
Ondo gained recognition initially for tokenizing government bonds and bond exposures (like USDY, OUSG) and is still one of the largest RWA platforms today.
Recently, Ondo has expanded its business into the stock sector, collaborating with regulated custodians and clearing institutions like Anchorage Digital to hold real US stocks and issue corresponding on-chain tokens. This model provides compliance assurance for institutions and supports the construction of cross-asset liquidity pools, enabling tokenized stocks to interact with stablecoins and RWA debt assets. Ondo and Pantera Capital also announced plans to establish a $250 million fund to support RWA projects.
Injective - A blockchain born for real-world financial assets
Injective positions itself as a high-performance financial blockchain, with built-in order book matching and derivatives modules. Its ecosystem includes over 200 projects, including decentralized exchanges (Helix, DojoSwap), lending platforms (Neptune), RWA participants (Ondo, Mountain Protocol), and NFT trading markets (Talis, Dagora).
Two major advantages in the RWA field:
Wide asset coverage: Applications like Helix have launched tokenized US tech stocks, gold, foreign exchange, and other asset classes.
Strong connectivity to traditional finance: Integrating off-chain custody and settlement with on-chain issuance and trading in-depth with partners like Coinbase, Circle, Fireblocks, WisdomTree, and Galaxy.
The result is the formation of a low-latency, low-cost execution environment that supports collateral, composability, and the subsequent development of richer stock-linked products.
Backed Finance - Compliance first, covering multiple markets
Backed Finance operates under the Swiss legal framework and aligns with European MiCA regulatory regulations. The company issues fully collateralized tokenized securities and collaborates with institutions like Alpaca Securities LLC for stock acquisition and custody, maintaining a 1:1 mapping between off-chain assets and on-chain tokens. Backed's coverage includes US stocks, ETFs, European securities, and some international indices. This allows investors to gain multi-market, multi-currency investment exposure on a single on-chain platform, such as combining US tech stocks, European blue-chip stocks, and global commodity ETFs, without being restricted by traditional market trading venues and hours.
Block Street - Releasing liquidity for tokenized stocks
The biggest advancement in this wave is the combination of real stock custody with low-barrier participation methods. With just a wallet and a stablecoin, anyone can gain price exposure to US stocks on decentralized exchanges (DEX) - without a brokerage account, unaffected by time zone restrictions, and fewer regional barriers. However, most current products still remain at the 'certificate stage': they are merely issuing and trading tokens, not yet fully converting them into financial building blocks that can be used for trading, hedging, and fund management. If the goal is to attract professional capital flows, high-frequency liquidity, and institutional participation, this will pose a significant challenge.
Before the 'DeFi Summer', DeFi also went through a similar phase. At that time, ETH was not widely used for lending or composability until the emergence of lending protocols. Once ETH became an acceptable collateral, liquidity quickly surged. Tokenized stocks are likely to experience the same transformation: becoming collateralizable, tradable, and composable assets.
If the first growth curve represents spot trading volume, the second growth curve will be driven by market activities spurred by capital efficiency and financial instruments.
Expected development directions include:
Lending and credit based on tokenized stocks (such as Block Street)
Short selling and hedging tools (reverse tokens, perpetual contracts, options, etc.)
Structured strategies and possible
Cross-platform interoperable baskets/portfolio products in DeFi
Platforms that can provide an integrated on-chain experience covering spot trading, short selling, leverage, and hedging, and make tokenized stocks usable in lending, options, and stablecoin protocols will have a competitive advantage.
Conclusion
Tokenizing US stocks and ETFs is not just about moving Wall Street on-chain, but also bridging the gap between traditional capital markets and blockchain. From issuance (Ondo), multi-market access (Backed Finance), to releasing liquidity (Block Street), the full-stack system of tokenized stocks is steadily taking shape. With the expansion of institutional participation and the maturation of trading infrastructure, composable, tradable, and collateralizable tokenized stocks are expected to evolve into one of the most influential and sustainably appreciating asset classes in the RWA market.
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