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This episode of Mankun's crypto tavern focuses on the recent hot topic of U.S. stock tokenization.
At the end of June, platforms like Robinhood, Kraken, and Bybit successively launched tokenized U.S. stock products, attracting widespread attention from the crypto space and the traditional financial industry. Is this phenomenon a new narrative or old wine in new bottles? We invite three guests to discuss from different perspectives, covering technology, compliance, investment opportunities, and risks.
The tavern is open; please introduce yourselves, guests!
CryptoMiao: Hello everyone, I am Miao Ge, a special guest writer for Mankun, holding qualifications as a legal professional, CPA, tax advisor, and accountant, focusing on tax matters. I have rich experience in Web2 and am researching DeFi arbitrage and token models in Web3, especially with deep accumulation in the Sui ecosystem. Feel free to DM me with tax or Sui-related questions!
Sam: I am Sam, nicknamed 'Heavy Armored Mage,' meaning 'heavy equipment,' not anything else (laughs). I was involved in mining early on, participated in exchanges and projects from 0 to 1, and am now COO of Techub News, focusing on Hong Kong's crypto media operations. We are directly invested by Gaofeng Group and are the official media partner of Bitcoin Asia and Bitcoin Magazine, hosting Space every Tuesday and Friday, focusing on trading and industry dynamics, and also organizing offline summits in Hong Kong; please pay attention!
Crypto flamboyant lawyer: Hello everyone, I'm Loren, inspired by American dramas to pursue a career in law. My undergraduate degree is not in law; I later studied law in Hong Kong, worked in court, and now focus on criminal compliance defense. I prefer investing in meme coins on-chain, dabbling in inscriptions, PumpFun, and AI, and can be considered a 'warrior for the dirt dog.'
Dongdong Robin: I am Dongdong, a researcher at Mankun, working in the branding department, co-hosting the crypto tavern with Meg. Every Thursday, we select a hot topic in Web3, inviting guests to chat casually; everyone is welcome to participate!
Meg: I'm Meg, transitioning from traditional finance to Web3, experiencing CEX, DEX, mining pools, payments, and law firms; I can be considered a 'veteran' in Web3. I hope you all enjoy our show! Now let's get into the topic, starting with Dongdong's first question.
Q1: The tokenization of U.S. stocks, is it a new narrative or old wine in new bottles?
Dongdong Robin: The recent surge in interest in tokenized U.S. stocks has seen platforms like Robinhood, xStock, and Kraken almost simultaneously launch related products. The entire network is buzzing, with discussions from Twitter to Web2 news media. How do you view this trend? Where does it come from? Is it a new narrative or old wine in new bottles?
Sam: As media personnel, we are highly sensitive to new tracks, and our information acquisition is faster than that of ordinary users. The tokenization of U.S. stocks is essentially a branch of RWA (real-world assets), similar to the continuation of STO (security token offerings). STOs were explored in 2017-2018 in an experimental nature, existing in a gray area, such as putting mining rights on the chain. The narrative of RWA began to rise last year as regulations gradually loosened, and traditional companies hope to participate in the crypto capital appreciation through on-chain involvement.
Licensed institutions like Robinhood, Bybit, and Kraken have driven this wave, but its underlying logic is asset securitization (ABS), traceable back to the MBS (mortgage-backed securities) of the 2008 subprime crisis. When we were incubating projects early on, we designed ABT (Asset Tokenization) schemes, and similar logic already existed. Now, technology and regulation are more mature, such as Robinhood issuing on Arbitrum L2, emphasizing compliance and custody, obtaining licenses like MiCA.
Compared to traditional U.S. stocks, tokenized stocks support 24/7 trading, have a lower entry threshold, and offer greater liquidity. Traditional U.S. stock accounts are complex (e.g., Tiger, Futu, IBKR require cumbersome certification) and are limited by trading hours and holidays (e.g., IBKR emails notify holidays where trading is not possible). Tokenized stocks can be traded anytime, suitable for event-driven opportunities (like sudden bad news), but excessive liquidity may lead to retail investors being manipulated. In professional terminology, it can be referred to as ABT, an on-chain variant of ABS, but one must still be wary of manipulation risks.
Crypto flamboyant lawyer: I disagree that it's entirely 'old wine in new bottles.' The tokenization of U.S. stocks is not a new concept; FTX and Binance tried it in the early years, but the regulatory environment was unclear, and it did not reach scale. Now, with the new U.S. president in office, changes in SEC leadership, and a softening attitude towards crypto assets in Hong Kong and Singapore, the global regulatory environment is improving, fueling the trend. Comparatively, the internet had its embryonic form in the 1960s but only globalized after 2000; concepts that are ahead of their time require infrastructure and cognitive follow-up.
Tokenization of U.S. stocks is promoted first in Europe, Asia, and the U.S. because U.S. citizens can trade U.S. stocks directly, leading to less demand, while other regions face account opening and KYC thresholds; tokenization provides convenience. RWA is broader; the 1970s had early forms of securities network trading (like the 1990s' popularization of online trading). Tokenization reduces intermediary costs (like brokerage, law firms, audit fees, which can take up 10% of traditional listings), especially for unlisted companies (like SpaceX, OpenAI) to directly tokenize through Pre-IPO, representing a qualitative leap.
CryptoMiao: The trend stems from market maturity and changes in user demand. In the past, STOs and IDOs were gimmicks for exchanges to grab traffic; now, the market has sufficient users, and tokenization feels more like a reflection of product maturity. It lowers trading thresholds and supports all-day trading, but due to a lack of a comprehensive arbitrage mechanism (like minting and redemption channels), on-chain prices may disconnect from off-chain stock prices. For example, the daily K-line of tokenized stocks on Solana or Robinhood has low correlation with NASDAQ stock prices; the absence of arbitrage mechanisms leads to price deviations, and investors need to beware of insufficient liquidity and slippage risks.
Meg: From the perspective of the crypto space, the market has shifted from competition for traffic to mature product development from STO to IDO to RWA. Back then, IDOs were just a gimmick for exchanges to grab users; now the market is more rational, and tokenization reflects both product and market maturity. It is not only endogenous growth within crypto but also an external force attracting the attention of traditional finance, connecting Web2 and Web3.
Dongdong Robin: The tokenization of U.S. stocks has historical roots and is revitalized by regulatory and technological advancements, combining short-term sentiment with long-term potential. We will now move on to the next topic.
Q2: What are the differences between holding tokenized stocks and traditional stocks? How can compliance be implemented?
Crypto flamboyant lawyer: According to Robinhood's official explanation, tokenized stocks are price certificates of on-chain smart contracts, not real stocks. Users cannot enjoy traditional shareholders' rights (such as voting rights and company governance rights) but can only obtain economic benefits (like dividends). The method of dividends varies by issuer: xStock will automatically convert dividends into tokens, while Robinhood will directly distribute dividends.
The redemption mechanism is a key pain point. If it cannot be exchanged for real stocks, the economic logic is questionable, and redemption may involve additional costs with opaque processes. Discussions with other lawyers suggest that if tokenized stocks cannot be redeemed, it would be like 'only going in, not out,' raising economic logic concerns. Regarding compliance, issuers must obtain traditional financial licenses (like EU MiCA, VASP), but outside the U.S., SEC regulatory strength is limited, creating compliance uncertainties. Web3 is still developing, and compliance issues need continuous resolution.
Sam: There are three major differences between tokenized stocks and traditional stocks:
No shareholder identity: Tokenized stocks are held by custodial institutions with real stocks, anchored 1:1; users only hold on-chain certificates without shareholder rights. Holders of traditional stocks can control the company (like holding over 33% of shares); this is not possible with tokenized stocks.
Price mapping attribute: similar to derivatives, only tracks price, no voting or governance rights.
High liquidity and low thresholds: supports 24/7 trading, more flexible than traditional stocks (limited by trading hours and holidays), suitable for event-driven trading (such as sudden bad news), but excessive liquidity may lead to retail investors being manipulated.
Regarding compliance, licensed brokers like Robinhood must ensure asset custody transparency and third-party audits through EU qualifications. Regulatory focus includes transparency, asset security, and proof of reserves. Traditional stocks have mature registration systems, while tokenized stocks fall under the custody of institutions, similar to financing and fundraising models. Investors are advised to consult professional institutions (like Mankun) to assess the quality of custody and auditing.
CryptoMiao: Tokenized stocks are similar to ETFs, encapsulating individual stocks with prices formed by market transactions, not driven by oracles. Unlike the early oracle model of FTX (pledging stablecoins or BTC, trading in an asset pool), current tokenized stocks require real stock pledges. However, the lack of an arbitrage mechanism (like redemption channels) leads to price deviation risks; for instance, Tesla stock on Solana dropped 1% while NASDAQ dropped 5%.
Traditional exchanges are limited by trading hours (e.g., from 8:30 AM to 3:00 PM, with low pre-market and after-hours trading volume). Tokenized stocks support all-day trading, suitable for rapid pricing (like Musk's statements, war events, etc.), but insufficient liquidity (e.g., Apple stock only trades about $90,000 daily) amplifies slippage risk. Professional institutions can apply for redemption (like Ondo Finance's U.S. Treasury token USDY, with an annualized return of 4%+), but retail channels have not yet been opened.
Meg: Tokenized stocks are similar to 'paper gold'; users hold price certificates rather than physical assets. On-chain prices are formed through market transactions, similar to GMX's pool model (Mint and Redeem) or Hyperliquid's on-chain order book, rather than FTX's oracle model. Event-driven trading opportunities (like significant bad news) may first manifest on-chain, leading traditional markets. However, current trading depth is insufficient (like Apple stock trading only $90,000 daily on Bybit), and slippage is significant; exchanges may moderate liquidity to avoid false trading volumes.
I wonder if the price mechanism is fed by oracles from traditional stock prices? Can Miao Ge explain?
CryptoMiao: It is not an oracle model. The price of tokenized stocks is formed through market matching based on real stock pledges, not the oracle asset pool model of FTX. The order book model requires matching between buyers and sellers (like the long and short sides of perpetual contracts), rather than asset pool trading. Poor liquidity leads to price deviations, requiring improvement in minting and redemption mechanisms.
Sam: Tokenized stocks do not require an oracle, as their liquidity comes from the stocks anchored by custodial institutions. On-chain prices can inversely affect traditional markets, as traditional markets have a lag due to trading hours, while on-chain has nearly zero latency. Current trading is still dominated by centralized exchanges, not fully on-chain.
Meg: On-chain prices lead traditional markets, especially during major events, which are indeed trading opportunities. However, due to insufficient depth, retail traders need to be cautious with orders to avoid becoming 'slippage victims.'
Q3: What are the risks and opportunities of tokenizing unlisted stocks?
Dongdong Robin: The most striking aspect of this tokenization trend may be that it has expanded to unlisted stocks like SpaceX and OpenAI, sparking heated discussions. What risks do tokenized unlisted stocks carry? What opportunities exist?
Sam: There are three major risks in tokenizing unlisted stocks:
Legal compliance and governance conflicts: OpenAI and SpaceX may not recognize tokenized stocks, leading to unclear legal status.
Information asymmetry: The tokens behind may be fund LP shares, with specific information being opaque and circulation limited.
Opaque pricing: Insufficient liquidity and imperfect pricing mechanisms make it difficult to protect investors' rights.
Current tokenization is similar to the gray experiments of early STOs and should be treated with caution. The traditional stock market has a history of 400 years, and compliance and rights protection are mature; tokenized stocks are still in the experimental stage.
CryptoMiao: The biggest risk is that authenticity cannot be verified. OpenAI publicly denies that the tokens issued by Robinhood are its stocks; investors find it difficult to verify the authenticity and quantity of pledged assets. Dividends and voting rights cannot be guaranteed, making it challenging to protect rights. For example, xStock withdrew from Uniswap (involving about $330,000 in liquidity), renamed it 'Demo Token One,' suspended trading, and investors had no means to protect their rights, as the U.S. SEC and SpaceX did not intervene in overseas issuance.
If the company cooperates (for example, early founders pledge 30% of shares and notarize), tokenization can provide initial pricing and cash flow recovery opportunities for startups, similar to market-based pricing in venture capital, reducing the risk of insufficient R&D funding. This is a significant opportunity for early projects.
Crypto flamboyant lawyer: The attempt to tokenize unlisted stocks allows ordinary people to participate in quality assets' Pre-IPO, but most end in failure. Quality companies (like OpenAI) do not need to attract retail investors through tokenization; information asymmetry and regulatory gaps amplify risks.
Tavern listener's question: Is it feasible to tokenize via SPAC (special purpose acquisition company) to avoid risks? For example, set up a SPAC to acquire OpenAI equity, then tokenize the SPAC equity.
Crypto flamboyant lawyer: Theoretically feasible; SPAC can serve as an intermediary to isolate risks, but company authorization is needed. Quality companies lack motivation, and small and medium enterprises are more likely to attempt it. Some domestic companies have consulted similar operations, but implementation is difficult and requires company recognition and public disclosure.
Meg: Tokenization of unlisted stocks is like 'buying a drum and turning it into a dog'; retail investors need to be cautious of risks. The xStock withdrawal incident is an example; I wanted to buy SpaceX but ended up as a 'dirt dog warrior.' The Mankun legal team can provide overseas structure and compliance services for companies going abroad; consultations are welcome.
Dongdong Robin: Indeed, the risks are significant. I see people on Twitter optimistic about SpaceX and OpenAI, thinking tokenization is an opportunity to access quality companies that are hard to reach through value investing, only to find the pool withdrawn and no means of protection. Next, let's discuss the selection of issuing chains.
Q4: Regarding the tokenization of U.S. stocks, what considerations are there for issuing public chains?
Dongdong Robin: Each has different considerations in selecting the token issuance chain. Robinhood chooses Arbitrum L2, while xStock chooses Solana; what considerations are there in issuing chain selection? Miao Ge, please start.
Crypto Miao: Solana has become the first choice due to its large user base, fast trading speed, and mature DeFi ecosystem (like rich pools and exchange protocols), suitable for chasing trends like meme coins and U.S. stock tokenization. Arbitrum may relate to Robinhood's long-term planning (like self-built L2) due to low gas fees and strong contract customization. The Sui ecosystem has great potential, but its user base is weak, making it difficult to become a mainstream issuing chain in the short term.
Selection related to company governance style and investment direction. Solana's strategy is similar to Coinbase's steady approach, while Arbitrum relates to Robinhood's heavy holdings and technical collaboration. There are also teams on Sui planning to issue tokenized stocks, but promotion will take time.
Sam: Chain selection is more based on commercial interests rather than technical superiority. Robinhood has cooperated with Arbitrum for a long time (e.g., Robinhood Wallet), and choosing Arbitrum may be to boost ARB prices (which rose 20% last year) or control L2 profits (like self-built L2's gas fee earnings). Solana attracts xStock due to high performance and low gas fees, similar to the choice logic of Optimism. Technical considerations come second; manipulation and interest games are core, and the chain is simply a tool. Arbitrum may be more 'obedient,' providing customized solutions for Robinhood.
Crypto flamboyant lawyer: Solana's daily active users, capital volume, and DeFi infrastructure lead, making it suitable for tokenized products, such as meme coins and PumpFun's ecological advantages. Arbitrum may be selected due to contract customization and KYC/AML compliance requirements, but specific considerations depend on capital operation strategies. I know little about Arbitrum, but Solana's ecological advantages are undeniable.
Dongdong Robin: The choice of issuing chain indeed involves both technical and commercial considerations.
Q5: What is the long-term value of tokenized U.S. stocks? How do you view perpetual contracts for U.S. stocks?
Dongdong Robin: Let's discuss further; how do you all view the long-term value of tokenized U.S. stocks? Additionally, perpetual contracts are a unique financial tool in the crypto market; what do you think of U.S. stock perpetual contracts? Will they bring new shocks? I'm personally very interested; I think U.S. stock perpetual contracts may be more intriguing than tokenization.
CryptoMiao: Tokenization of U.S. stocks has long-term value, similar to the transformation of stocks from offline to the internet (the rise of online trading in the 1990s). The decentralization and transparency of Web3 reduce trust costs, supporting all-day trading and rapid pricing (like Musk's statements, war events, etc.). Perpetual contracts are easier to realize, as they do not require physical stock collateral; FTX had already attempted stock perpetual contracts in 2020 (30 types of stocks).
I serve as a Types ambassador on the Sui chain and have communicated with the development team. They attempted perpetual contracts, but due to a small number of traders and large capital, the order book model had a significant spread (e.g., a sell order at $100, a buy order at $50), so they adopted asset pools and oracle pricing. However, the reliability of oracles for stock prices is a bottleneck; closer market linkage is needed, or else the spread or manipulation risk is high.
Sam: Tokenization of U.S. stocks, as a form of RWA, is superior to the ABS of the 2008 subprime crisis based on four aspects of progress:
High transparency: Public chain records can be verified, and information symmetry is better than traditional finance (subprime mortgage crisis assets were opaque).
Improved regulation: Compliance requirements (like custody and auditing) are stricter than in previous years.
Risk control: Quality asset selection and smart contract automation reduce human risks, avoiding the complex structures of the subprime mortgage crisis.
Technological advancement: Blockchain infrastructure is superior to traditional systems.
However, the current speculation is quite high, similar to the meme coin's 'consensus equals value,' and one must be wary of artificial manipulation risks; it is still in the experimental stage. Perpetual contracts have great potential as they do not require physical assets, and the market acceptance is high.
Crypto flamboyant lawyer: Grand narratives are appealing, but retail participation is low (e.g., tokenized Apple stock has only $90,000 in daily trading). Slippage and liquidity issues are significant. On-chain 24/7 trading has the advantage of 'pre-market matching,' but lack of depth means retail traders can raise the price even with small trades. Perpetual contracts have greater market acceptance as they do not require physical asset collateral. Long-term development of blockchain can be expected, but short-term needs observation. Real issue: has anyone present bought tokenized stocks?
CryptoMiao: I've bought some on Solana; the slippage is significant, and the trading volume is low—any larger trades can raise the price by several points. It's suitable for fractional stock arbitrage but not for large investments.
Crypto flamboyant lawyer: I see that the community is mostly observing; retail participation enthusiasm is low, and grand narratives have not materialized.
Meg: The tokenization of U.S. stocks is not only an endogenous growth within the crypto space (such as the wealth effect of meme coins) but also an external force attracting the attention of traditional finance, connecting Web2 and Web3. Similar to how Payoneer connects Web3 funds to real-world consumption, the long-term potential is huge, but market and regulatory maturity are needed. The slippage issue mentioned by Miao Ge is very real; retail investors need to be cautious with orders.
Q6: Tokenized U.S. stocks are a form of RWA; what other tokenization directions are worth关注?
CryptoMiao: I think copyright-related assets have the most potential, such as music, film, books, and website advertising revenue sharing. YouTubers (like Mr. Beast) can tokenize video copyrights to quickly recoup million-dollar investments, with holders enjoying long-term dividends (like advertising fees and view income), similar to stock dividends. Compared to traditional financing, it is transparent and efficient, suitable for content creators. For example, website advertising revenue sharing and Apple Music copyright fees can be distributed directly through tokens, with on-chain records ensuring transparency. There have also been attempts to tokenize book publishing revenues.
Sam: RWA is superior to ABS in transparency and automation, but human manipulation is a trust pain point. Tokenization of copyrights and real estate requires strong regulation and legal constraints; otherwise, long-term dividends cannot be guaranteed. As an old miner, I am skeptical about human factors; the original intention of blockchain is to reduce trust, but humans remain the biggest variable. Three elements need to be satisfied: relational contracts, high value, and long-term effectiveness. 'Leek consensus' can also drive up value as long as the funding is sufficient; poor projects can also take off, but this does not constitute investment advice.
Crypto flamboyant lawyer: Domestic companies (like Yunnan Tea Mountain and Shenzhen real estate developers) consult RWA financing, similar to ABS transferring future earnings, such as tea leaves from tea mountains or undeveloped land receiving payments on-chain. However, costs are higher than traditional financing, often for market value management. RWA tokens issued in Hong Kong mostly do not circulate in secondary markets and are limited to investor subscriptions. In practice, they face regulatory and liquidity dilemmas.
Tavern listener's question: In the future, will tokenized stocks enjoy shareholder rights like traditional stocks?
CryptoMiao: Similar to ETFs, redemption requires applying to the issuer (like Robinhood) to convert to real stocks, but the channels are not smooth. In the future, if the entire stock market goes on-chain (like exchanges going on-chain), it could directly issue tokens to grant shareholder rights, but this is difficult to achieve in the short term and may take 10-20 years.
Meg: If traditional finance fully goes on-chain (like lending, supply chain finance, etc.), shareholder rights might be achievable, but in the short term, it's still institutionally dominated, and retail investors struggle to outpace inflation.
Dongdong Robin: How can tokenized stocks ensure shareholder rights? This requires the market to be sufficiently mature, with increased trading volume and participation, for issuers to open up rights. For instance, the NYSE and Singapore Exchange are trying all-weather trading, which could be a path to realization on-chain.
As a branch of RWA, tokenization of U.S. stocks connects Web2 and Web3, reducing trading thresholds and costs while supporting all-day trading and rapid pricing. Its advantages lie in high transparency, improved regulation, and mature technology, but it faces challenges such as insufficient liquidity, price deviation, lack of redemption mechanisms, and regulatory uncertainties; the risks of tokenizing unlisted stocks are even higher. Long-term, RWA is expected to reshape the finance and content industries, requiring the maturity of technology, regulation, and markets.
Thank you to all the guests; this episode of the tavern ends here!
/END.
Original authors: Zheng Hongde, Xu Xiaohui
