Editor: Wu Says Blockchain

In this episode of Wu Says podcast, Valentin Gui, head of xStocks at Kraken, 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 discussed how xStocks differentiates itself from competitors like Robinhood, how it addresses global regulatory challenges, and revealed the platform's future expansion plans. He emphasized the open nature of xStocks—permissionless, supporting multi-chain deployment, and promoting collaboration in an alliance format—and expressed a long-term vision for it to become part of the Web3 financial infrastructure.

Clarifying the Background of xStocks and the Token Collateral Mechanism

Ehan: Can you talk about the origins of the xStocks project? There are questions in the community regarding the previous project DAOStack and its failed ICO. Can you explain what happened at that time and how it affects xStocks?

Valentin: Of course. First, I want to clarify that I am the general manager of xStocks under Kraken. We are collaborating with Backed, which is the issuer of these tokens. I assume the issue you mentioned refers to a company or project that our partner was previously involved with. 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 collaborative mechanism to more centralized exchanges and on-chain ecosystems.

One aspect we particularly value is that its token issuance model is very rigorous, minimizing common risks. Unlike many tokens, each xStocks token is fully collateralized 1:1 by real stocks, and tokens can only be issued after the underlying stocks are genuinely purchased and held by a custodian. We strongly endorse this "assets first, tokens later" approach, as it ensures that every token has real value backing it.

Why Choose Stock Tokenization: Achieving Global Financial Inclusion with Synthetic Assets

Ehan: Why did xStocks choose the direction of stock tokenization? What problems does it mainly solve?

Valentin: That's a great question. Essentially, we want to solve the issue of allowing users and investors to access the stock market on-chain, especially those who previously had no channels to buy stocks. One of Kraken's missions is to promote global financial inclusion, and we are particularly focused on how to enable more people to access traditional assets like the U.S. stock market through tokenization.

Of course, users are not actually buying these stocks; they do not have the rights to the stocks themselves. Instead, they gain a "synthetic exposure" linked to the performance of these stocks through tokens, meaning they can benefit from stock price fluctuations without holding the actual stocks.

Kraken's Layout for RWA and Collaboration Promotes the Launch of xStocks

Ehan: xStocks has received strong support from Kraken. How was this collaboration established? How has it achieved 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 wanted to participate more in the RWA (real-world assets) space, bringing these traditional assets on-chain. When evaluating suitable RWAs for tokenization, we focused on stock assets—because stocks are widely recognized globally and users are familiar with them. However, many people cannot directly buy stocks, so we thought about whether we could allow users to gain the benefits of stock performance through a "synthetic token" without actually owning the stocks themselves.

Initially, we considered whether to issue tokens ourselves, but after discussions with several companies, we ultimately decided to collaborate with Backed, as they already had a complete set of mature processes. Solana also joined us at this stage, and the three of us built a complete collaborative framework.

xStocks can be quickly accepted by other centralized and decentralized exchanges largely due to our very open collaboration mechanism. Kraken was the first centralized exchange to go live, but other platforms can also directly approach Backed to sign agreements and independently issue xStocks tokens. Kraken does not have any "privileges"; we are just the first participant. This open, alliance-style collaboration model is key to the rapid expansion of xStocks.

Key Differences from Robinhood: Openness and Multi-Chain Circulation

Ehan: Some people may compare xStocks with existing platforms like Robinhood. What are your differences?

Valentin: That's a great question. Robinhood launched its own stock tokenization product in early July. However, 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 Robinhood's own platform; they cannot be transferred out or circulated on other chains.

In contrast, xStocks is completely open. You can self-custody these tokens and transfer them to any DEX or dApp for use, supported by the entire Web3 ecosystem. Moreover, xStocks is multi-chain deployed—initially launched on Solana, with BNB Chain and Injective coming soon, and we are also in discussions with several other chains. 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 about leading platforms like Binance or Coinbase launching similar products?

Valentin: We are actually not worried about competition. To be honest, we hope they join us in this endeavor. The reason we designed this collaborative mechanism is to make it easy for participants like Binance and Coinbase to join; they just need to negotiate a suitable plan with our issuing partner, Backed.

From the beginning, we have built xStocks as an open, inclusive alliance. If they choose not to join and decide to create their own system, that's fine with us. But our doors are always open—any institution willing to participate is welcome. We hope to build this ecosystem into an industry standard that benefits more people.

Addressing Liquidity Challenges in Centralized and Decentralized Exchanges

Ehan: Some feedback indicates that xStocks lacks liquidity on centralized exchanges. How will this issue be resolved?

Valentin: That's a good question. At Kraken, we have placed great importance on liquidity issues from the start and have made many preparations. Currently, Kraken has not encountered serious liquidity problems, 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 faced challenges in this area. But we believe that as the entire ecosystem matures, this issue will gradually improve. Backed is also taking some measures to enhance liquidity, although you would need to ask them for specific details. But as far as I know, the Backed team and other participating exchanges are actively promoting this matter.

U.S. Regulatory Challenges: How xStocks Differs from Failed Attempts by FTX and Binance

Ehan: Let's talk about the regulatory environment in the U.S. What are your views on the current opportunities and challenges in U.S. regulation? For example, do the election of Trump and the SEC's policies affect the advancement of xStocks? Past attempts at tokenized stocks by FTX and Binance have failed; how is xStocks different?

Valentin: That's a very good question. Indeed, the current political and regulatory environment in the U.S., especially the policy direction under Trump's administration and the SEC's stance, has had a significant impact on our strategy.

Currently, xStocks is intentionally not launching in the U.S., which is a joint decision with our partners. Because there is a lack of a clear regulatory framework in the U.S., we have not obtained the necessary compliance licenses. Therefore, Kraken will not offer this service to U.S. users, and the entire product will not be available in the U.S.

Of course, we are actively communicating with regulatory agencies, hoping to find a feasible compliance path in the future. But until then, xStocks will not be open in the U.S. market. We do not want to follow the old path of failure due to regulatory issues.

Complying with Securities Regulations: xStocks to Launch in Europe through a Cyprus Entity

Ehan: Hester Peirce mentioned today that any tokenized securities must comply with existing securities laws. How will this affect xStocks?

Valentin: It will definitely have an impact. Kraken takes compliance issues very seriously, regardless of when or how we launch. For example, in Europe, we will be launching xStocks in the coming days, but through an entity established in Cyprus.

This entity has been approved by 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 U.S. yet—there is no clear regulatory framework in the U.S., nor do we have the approvals we need. We will consider launching xStocks in the U.S. only after obtaining all necessary compliance licenses.

Main Regulatory Challenge: How to Define the Legal Nature of xStocks

Ehan: What is currently the biggest regulatory obstacle facing xStocks?

Valentin: The biggest issue is getting regulatory agencies—especially in Europe and the U.S.—to truly understand what xStocks is and how it should be classified.

Currently, there are three possible classifications: one is digital asset, one is debt instrument, and the other is security. Different regulatory agencies in different countries may have different understandings and judgments.

Therefore, in every communication with regulatory agencies, we must engage in additional discussions around this classification issue. At the same time, they also raise many questions about the operational mechanisms of xStocks and how to protect investors' rights. Kraken takes this very seriously, and it is a core part of our ongoing dialogue with regulators.

Exploring Opportunities for Pre-IPO Equity Tokenization

Ehan: Pre-IPO equity is a very exciting area. Does xStocks have plans to enter this space?

Valentin: This is indeed a direction we are very interested in and are actively discussing. I can't reveal too many details at this point, but we are closely monitoring related opportunities and hope to have more to share in the coming weeks.

xStocks' 2025 Roadmap: Global Expansion, Enhanced Token Utility, and Expanded Product Offerings

Ehan: Can you elaborate on xStocks' development plans moving forward?

Valentin: Certainly. One of our key goals this year is to continue expanding our market coverage. Currently, xStocks has launched in markets across Asia, Africa, and Latin America, and we will soon be launching in Europe. We also hope to enter the U.S. market by the end of this year. This is a high priority for us right now.

At the same time, we are working to enhance the utility 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 the user experience and make the assets more dynamic.

Additionally, we plan to significantly expand the range of tokens available. We have currently launched around 61 tokens and hope to increase this number to several hundred by the end of the year.

The Potential of Perpetual Contracts and Derivatives in Tokenized Stocks

Ehan: What are your thoughts on launching perpetual contracts for tokenized stocks?

Valentin: This is a very noteworthy area. When we talk about derivatives, such as leveraged trading and 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 Continued Expansion

Ehan: Do you expect significant growth in this market in the future?

Valentin: Absolutely. In fact, growth is already quite rapid. The total market capitalization of global stocks is in the tens of trillions of dollars, and we have observed a strong demand from users for on-chain exposure to these assets. As we continue to bring more stock assets on-chain in collaboration with Backed and provide them to users, we anticipate steady growth in this area.

Platforms like Robinhood have also begun to enter this space, 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 are correct about Gate.io; they are now part of our alliance. They have launched xStocks, and we are pleased to be involved 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 yet, so I won't name them until they are confirmed.

Exploring 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 there is some work being advanced in this direction. Although there are no publicly available updates yet, we know they are interested in exploring the tokenization space.

IPO vs. Token Issuance: Possible Future Paths for Backed

Ehan: Looking ahead, does xStocks prefer to issue tokens itself or follow the traditional IPO path?

Valentin: I believe xStocks—more accurately, Backed as the issuer—will most likely choose the traditional IPO path. However, this question is better directed to the Backed team, and I will ensure they have the opportunity to address this topic later.

Will Tokenized Stocks Replace Traditional Stocks?

Ehan: Do you think stock tokenization could completely replace the traditional stock market in the future?

Valentin: I don't believe it will completely replace the traditional stock market. Traditional stocks still have many important applications—at least from Kraken's perspective. What excites us about xStocks and tokenized stocks is that they can complement traditional stocks, providing investors with a more complete and richer product mix and usage options, which is what makes this space truly exciting.

Could tokenized stocks completely replace traditional stocks? Perhaps, but a more likely scenario is that the two will merge, ultimately forming a new model that combines the advantages of both.

Expanding Markets Beyond the U.S.: Exploring Tokenization of Hong Kong and Chinese Stocks

Ehan: Is there a possibility of launching products outside of U.S. stocks in the future, such as Hong Kong or Chinese stocks?

Valentin: Absolutely. We have discussed this topic with the Backed team. As long as they can acquire the relevant underlying stocks in a compliant and transparent manner, there are no technical barriers preventing us from launching stocks from Hong Kong, China, or other markets.

Building a Cross-Chain Ecosystem: Enhancing the Utility of Tokenized Stocks

Ehan: Is there anything else you would like to share with our audience?

Valentin: Certainly. What excites us the 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. We are also pushing for more centralized exchanges to join the collaboration, hoping that xStocks can become one of the industry standards in the field of tokenized stocks.

Once this standard is established, we will be able to provide investors and users with the best liquidity and a seamless experience across chains and exchanges. This is precisely why we adopted an alliance and open collaboration model from the beginning.

There will be more tokenized stocks launching soon, and we will continue to explore new use cases to enhance the utility of these tokens. As the use cases expand, demand will grow accordingly.

Key to Driving Mass Adoption of Tokenized Stocks: Accessibility

Ehan: Looking ahead to the next two to three years, what do you think will be the biggest driving force for the mass adoption of tokenized stocks?

Valentin: I believe the key is "accessibility"—ensuring that any user can easily access tokenized stocks with just one click. One of the exciting aspects of tokenized stocks is that people already have a basic understanding of "stocks," even if they are not deep users of the crypto space. When you tell them that this is actually a tokenized representation of a U.S. stock that can provide synthetic returns linked to stock performance, they can quickly grasp the concept.

We believe that lowering the barriers to access and enhancing the usability of tokenized stocks will bring more users into the crypto world, thereby expanding the entire market. Therefore, from promoting the adoption of tokenized stocks to fostering growth in the entire crypto industry, "accessibility" will be the core driving force.

Long-Term Vision: xStocks as the Underlying Infrastructure of Web3 Finance

Ehan: What is your long-term vision for xStocks? Is it more like an infrastructure for the entire Web3 financial system, or a product centered around retail users?

Valentin: We do indeed position it as the infrastructure of the financial services system. At Kraken, when we plan our future roadmap, we do not strictly differentiate between traditional stocks and tokenized stocks—we will offer both. Our focus is on how to combine the two to provide end users with new and valuable experiences.

In many cases, we believe that tokenized stocks will gradually become the default way for users to gain exposure to U.S. stocks or international equity. This is the path xStocks is taking toward becoming infrastructure—from the user's perspective, they may not even 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 utility perspective, tokenized stocks have many unique advantages, which is why they are so attractive.

Market Misconceptions: Underestimating Global Demand and Market Size for Tokenized Stocks

Ehan: What do you think is the biggest misunderstanding among most people—even some venture capital firms—regarding tokenized stocks?

Valentin: I think it is that they underestimate how large this market can be. From my observations in the U.S., many investors, especially those in the U.S. or the Western Hemisphere, do not truly realize the strong global demand for stock exposure. There are many users around the world eager to invest in U.S. stocks or stocks from other international markets.

Tokenized stocks provide these users with a new pathway to gain returns linked to relevant performance in the form of synthetic assets. This potential is still overlooked by many. In fact, the market demand is much broader and deeper than they imagine.

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