Introduction

Stock tokenization is becoming the latest focus at the intersection of the cryptocurrency world and traditional finance. With the entry of platforms like Kraken and Robinhood, the market is attempting to bring real assets such as U.S. stocks and ETFs onto the blockchain, creating a global 24/7 on-chain capital market. As an industry-leading trading platform, this trend is not isolated but is driven by the popularity of stablecoins, the shadow dollar system, and the logic of real-world asset (RWA) tokenization.

The core logic is that stablecoins have built a global shadow dollar system, and stock tokenization is a natural extension of this, allowing non-U.S. users to access "shadow U.S. stocks" directly with USDT, bypassing the challenges of account opening, remittances, and cross-border settlements, forming an on-chain version of "Grayscale Wall Street." This model not only brings new liquidity opportunities but also pushes regulatory and compliance risks to the forefront.

At the same time, another reverse path is taking shape: on-chain assets are entering traditional markets through compliant restructuring. Recently, a Nasdaq-listed company changed its name to Tron Inc., incorporating the public chain ecosystem and TRX into its core strategy, signaling that the integration of crypto assets and mainstream finance is no longer just a conceptual idea but is gradually being implemented within a regulatory framework.

Is it a pie in the sky or a trap? The answer depends on whether a closed loop can be established:

• Can the real stock support and transparent custody be realized?
• Can liquidity and market-making be maintained in the long term?
• Can regional compliance mechanisms keep pace with the speed of innovation?

This article, written by HTX Ventures, will analyze the model, player landscape, regulatory situation, typical risks, and future evolution to help you determine whether stock tokenization is a golden entry point for RWAs or a gray trap in the capital market.

1. Why is the cryptocurrency world focusing on stocks?

Since the birth of blockchain technology, almost all assets that can be tokenized have been gradually brought onto the blockchain. From the earliest stablecoins to traditional financial assets like real estate, bonds, and funds, and now to the increasingly popular stock tokenization, each innovation attempts to eliminate various barriers and obstacles in the real-world financial system through blockchain.

The core logic of stock tokenization is to convert stock assets in traditional financial markets into digital tokens on the blockchain, enabling global 24-hour trading, fractional share purchases, and more efficient cross-border transactions. This model has garnered attention because it directly addresses the pain points faced by global retail investors, especially those in emerging market countries, when trading U.S. stocks, such as difficulties in account opening, remittances, and mismatched trading hours.

However, stock tokenization is not a new concept; it briefly appeared in 2020, with trading platforms like FTX and Binance attempting it, but ultimately failing under regulatory pressure.

2. Lessons from the past: FTX and Binance

In 2020, FTX, one of the earliest trading platforms to attempt stock tokenization, chose to collaborate with the German securities firm CM-Equity to purchase real stocks for custody and then issue tokenized stocks in the form of ERC-20 tokens, such as Tesla, Apple, and Coinbase stock tokens, selling them to global users on its trading platform.

FTX's initial foray was impressive, attracting a large number of retail investors from emerging markets. However, this model quickly drew the attention of European and U.S. securities regulators. The German Federal Financial Supervisory Authority (BaFin) and the U.S. Securities and Exchange Commission (SEC) issued strong warnings, stating that such businesses involved public sales of securities and must comply with securities regulations and obtain the necessary licenses. FTX was unable to meet these compliance requirements and was forced to quickly delist its stock token products.

In 2021, Binance also attempted to launch similar products, tokenizing stocks like Tesla, Coinbase, and Apple for trading in almost the same manner. However, Binance's attempt also did not last long and soon ceased related services under pressure from regulators in multiple countries.

The failures of FTX and Binance clearly conveyed a key message: the core challenge of stock tokenization lies in compliance and regulation, not technology.

3. Why is stock tokenization back in the spotlight?

Despite facing strong regulatory resistance, stock tokenization has been brought back to the agenda in 2024-2025, becoming a hot topic in the market. The reasons can be summarized in four points:

• Policy and political factors: In 2024, Trump publicly supported the development of cryptocurrencies, reigniting market expectations for potential regulatory easing. SEC official Hester Peirce also expressed interest in a moderate regulatory sandbox, providing a gray area in policy discourse.

• Entry of traditional financial institutions: Traditional giants like BlackRock and Franklin Templeton have begun tokenizing assets such as funds and bonds through blockchain. This move provides a model for stock tokenization, encouraging more traditional institutions to explore it.

• Maturity of technological conditions: Unlike in 2020, the rapid development of blockchain technologies like Solana, Base, and Arbitrum has significantly reduced the cost of on-chain transactions, increased speed, and made liquidity easier to achieve.

• Strong demand from real retail investors: Retail investors in regions like Southeast Asia, South Asia, and the Middle East still have a strong demand for U.S. stocks. Users in these areas hold a large amount of USDT but find it difficult to enter the traditional U.S. stock market, and stock tokenization directly fills this market gap.

4. Why is stock tokenization strongly related to the shadow dollar system and the popularity of stablecoins?

Stock tokenization is the "second layer evolution" of stablecoin-based on-chain dollars, transforming the shadow dollars held by retail investors directly into shadow U.S. stocks, changing RWAs from "static custody" to "composable dynamic assets." The hotter stablecoins become, the more runway this path has, but regulatory concerns about shadow dollars will also intensify.

Stablecoins are essentially the global "gray channel" of the shadow dollar system

• Dollar-pegged stablecoins (USDT, USDC) are no longer merely "payment tools in the crypto world" but are "dollar replicas" that bypass traditional cross-border clearing networks.

• In many emerging markets, stablecoins represent local residents' shadow claims to dollars. In the Philippines, Pakistan, Argentina, and Vietnam, users may not have local currency but possess stablecoins, which equate to "dollars."

• Therefore, from the retail investor's perspective: "Having USDT ≈ dollar deposits," but more flexible, allowing for entry and exit for trading and direct exchange for stock tokens.

• When stock tokenization emerged, it naturally became a new destination for stablecoins: USDT/USDC directly transformed into on-chain shadow price targets for Apple/TSLA, rather than first converting to fiat currency and then opening accounts with U.S. brokers.

The higher the popularity of stablecoins, the more runway there is for RWAs (real-world assets on-chain)

• In 2024, the circulation of USDT once exceeded $115 billion, making it the largest "dollar substitute" globally, with a circulation speed far exceeding that of traditional dollar wire transfers.

• With highly liquid stablecoins, on-chain RWAs (bonds, funds, real estate, stocks) naturally require new "reservoirs"; otherwise, USDT can only remain on centralized exchanges for contracts, unable to connect with real assets.

• Tokenized stocks are one of the easiest to understand and globally liquid RWAs, familiar to retail investors, and market makers can base their quotes on real secondary market prices, making them easier to trade than real estate, art, or receivables.

The shadow dollar system + stock tokenization makes "U.S. stocks" a second-layer dollar asset on-chain

• From a regulatory perspective, the combination of stock tokenization + stablecoins essentially forms a "shadow dollar capital market":

• Stablecoins provide a shadow alternative to dollar currency;

• Stock tokenization shadows the equity returns of U.S. companies;

• The combination allows non-U.S. residents to use "shadow dollars" to trade "shadow U.S. stocks" 24/7.

• This combination bypasses the U.S. brokerage system, SWIFT settlement system, and the direct tax reporting system in the U.S. (theoretically).

• Because of this, regulators remain highly sensitive to it, focusing on the "spillover of dollar influence" rather than merely the tokenization play.

This logical line explains why Kraken, Bybit, Robinhood, and Backed are willing to make a comeback in 2024-2025

• Stablecoins have been validated by global users (fast transactions, convenient cross-border payments), and on-chain RWAs have the backing of giants (BlackRock, Franklin Templeton).

• Kraken and others see the opportunity for retail investors to transition from gray areas into this shadow dollar system.

• Robinhood's initial trial of stock tokens in the EU also reflects its optimism about the USDT traffic in non-U.S. markets, aiming to capture user groups that were previously inaccessible.

5. Three main models of stock tokenization

Although the concept of "stock tokenization" consists of just a few words, its practical implementation does not follow a single path.

Based on whether there is real stock custody, on-chain issuance, and trading methods, the current mainstream practices in the market can be summarized into three types: 1) real stock custody + on-chain token issuance, 2) contract for difference (CFD) model, and 3) pure DeFi synthetic assets. Each of these models has its pros and cons, and the regulatory pressures, liquidity designs, and user adaptation scenarios behind them also show significant differences. Understanding these differences is fundamental to grasping the entire stock tokenization landscape.

Model 1 | Real stock custody + on-chain token issuance

This is the mainstream route currently adopted by Kraken and Bybit, and it is relatively the most prudent approach from a compliance perspective.

Operational Mechanism

• Licensed issuers or brokers (such as Backed Finance, Dinari) purchase real stocks (like Apple, Tesla) in the traditional secondary market.

• The stock assets are held by compliant custodians (such as BitGo, Anchorage) to ensure that the holdings are verifiable.

• The issuer issues tokens on-chain at a 1:1 ratio based on the custody shares, such as 1 share of Apple = 1 AAPLx (or bAAPL), which can be deployed on networks like Solana, Base, etc.

• Users can purchase this token with USDT on trading platforms like Kraken, thereby indirectly obtaining on-chain assets linked to real stocks.

Core Points of the Model

This seemingly ideal setup has the following limitations:

• Although linked to real stocks, most tokens do not automatically come with voting rights or dividend rights. Robinhood, Kraken, and others clearly state on their websites: "This is not shareholder rights."

• If users wish to exchange tokens for real stocks, they typically need to complete strict KYC and follow the custody redemption process, which may also incur additional fees. Some issuers do not even support retail investors redeeming fractional shares.

• Therefore, the vast majority of users purchase such tokens mainly to capture stock price fluctuations, with a very low proportion actually exercising shareholder rights.

Why are Kraken and Bybit still actively involved?

• Compliance buffer: Supported by real stocks and transparent custody, if regulatory pressure arises, most of the responsibility can be shifted to the issuer (such as Backed).

• DeFi composability: Tokens have on-chain transfer attributes and can be used for cross-chain combinations, such as Kraken's AAPLx being transferable to Solana wallets for users to provide liquidity on Jupiter or engage in liquidity mining on Kamino.

• More attractive to retail investors: Compared to pure CFDs or synthetic assets, the "realness" backed by real stocks can lower the psychological barrier for users, making market education and user acquisition easier.

Special Case | Robinhood's "Full Chain Integration" Approach

Robinhood's approach is more aggressive, relying on its own U.S. brokerage license, which already provides the capability for real stock trading and custody. Currently, Robinhood is developing its own Robinhood Chain, directly linking stock accounts to the blockchain, achieving integrated self-custody, on-chain issuance, and matching, while connecting with Bitstamp to provide global liquidity.

This model is akin to a "brokerage version of Binance Chain," where Robinhood independently controls the entire process from ticket issuance, market-making to data flow, keeping profits, users, and traffic within its own system.

However, it should be noted that such a highly closed-loop compliance structure and technical barrier cannot be easily replicated by ordinary trading platforms or wallet service providers in the short term, making it difficult for smaller players to bear the investment costs of building this ecosystem.

Model Two | Contract for Difference (CFD): Simple Shell, Old-School Play

Compared to real stock custody, CFDs (Contracts for Difference) appear to be the simplest but are currently one of the most widely adopted methods by trading platforms.

Operational Mechanism

• Typical players like Bybit CFD, PrimeXBT, etc., adopt a similar structure.

• Users select "Apple CFD" through MT5, MT4, or Bybit's built-in CFD page, opening positions to bet on price movements.

• The platform itself or external liquidity providers (LPs) bet against users without needing to hold the underlying stocks or physical custody.

• The spread, slippage, and leverage parameters are set by the platform, and the essence of user trading is a price game between the platform or LP, with no stock delivery or shareholder registration involved.

Why is the CFD model prevalent?

• Fast deployment: It only requires connecting to mature LPs and introducing real-time stock prices to start trading.

• Relatively low compliance pressure: Most jurisdictions classify CFDs as derivative trading, and as long as there is no physical equity delivery, they do not fall under the strictest regulatory categories of traditional securities law.

• High user acceptance: Cryptocurrency users are generally familiar with BTC and ETH contracts, making the transition to U.S. stock contracts seamless, as the operational logic remains consistent.

Bybit's Dual-Track Strategy

Bybit's recent developments are particularly typical:

• On one hand, it collaborates with Backed to introduce xStocks (such as AAPLx, TSLAx) targeting users who prefer "real stock backing," directly competing with Kraken and Robinhood.

• On the other hand, it retains a traditional CFD product line to meet the needs of speculative users seeking high leverage and around-the-clock arbitrage opportunities.

This dual-track hybrid model allows Bybit to simultaneously cover conservative users who have a psychological need for real stock backing and high-frequency speculative users seeking leverage volatility, maximizing liquidity sources and user base.

Risk Points: Common Issues Users Should Be Aware Of

Although the CFD model is simple and easy to use, the underlying risks should not be overlooked:

• No shareholder rights: CFDs do not grant any voting rights or dividend rights, nor is there a shareholder registry linkage.

• Counterparty is the platform or LP: User profits equate to platform losses; if trades are too precise, some platforms may mitigate risks through slippage or forced liquidation mechanisms, leading to the possibility of negative balances and increased slippage.

• Essentially a "betting market" under regulatory restrictions: Therefore, CFDs are more suitable for short-term volatility operations, and long-term holding does not possess the same value attributes as stocks.

Model Three | On-Chain Pure DeFi Synthetic Assets

Compared to the previous two models, on-chain pure DeFi synthetic assets represent the most "fundamentalist" decentralized solution. Representative projects include the early Mirror Protocol and the still-operating Synthetix.

Operational Mechanism

• Users collateralize stablecoins (such as UST, sUSD, etc.) by staking them in a smart contract as collateral for generating synthetic assets.

• The protocol calls oracles to fetch the underlying stock price in real-time, such as Apple currently at $180.

• The smart contract automatically mints corresponding stock synthetic tokens based on oracle data, such as "mAAPL," "sTSLA," which only track stock prices and do not represent ownership of real stocks.

• Users can participate in liquidity provision (LP), trade freely, or combine them into indices or leverage on on-chain DEXs (such as Terraswap, Uniswap, Curve).

Advantages

• Fully on-chain: It does not rely on centralized matching or custody; all issuance, circulation, and destruction are automatically executed by smart contracts.

• Flexible combinations: Can be assembled with other modules within the DeFi ecosystem, deriving various plays such as collateralized lending, options, and structured products.

Limitations and Risks

• Lack of real stock backing: Synthetic assets rely entirely on oracle price feeds, with no real equity backing.

• Higher systemic risk: If an oracle is attacked or fails, the price peg becomes invalid, and the contract itself may lose its ability to pay.

• Liquidity depletion risk: Compared to centralized market-making, on-chain LP's market-making depth relies on participants continuously placing orders and distributing profits. Without sustained incentives, liquidity can quickly diminish.

The failure of Mirror Protocol is a typical case: After the collapse of the Terra ecosystem, UST broke its peg, and the on-chain synthetic stocks mAAPL and mTSLA became worthless.

Although Synthetix is still operational, some sAAPL and sTSLA remain on Optimism and the Synthetix main protocol for collateral or building synthetic debt pools, but the user scale and TVL have significantly shrunk compared to peak periods, and the popularity of pure DeFi stock tokenization is far lower than that of stablecoins and ETH leverage scenarios.

Comparison of Three Stock Tokenization Models

6. Player Breakdown · Who is Practicing on This Chain

Behind this wave of stock tokenization, a relatively clear supply chain has formed, encompassing upstream issuance—custody—platform liquidity—end distribution.

Backed Finance: Core Issuer Behind the Scenes

• Headquartered in Switzerland, it is currently one of the most representative stock token issuers in the industry, responsible for purchasing real stocks from traditional brokers and relying on Chainlink's Proof of Reserve (PoR) to disclose custody details in real-time on-chain.

• Core clients include Kraken, Bybit, Ondo, etc. The stock tokens provided by Backed are regarded as "compliance-ready for listing," quickly listed on CEX for retail investors.

• The key logic is that the issuer assumes the role of securities compliance and custody, while CEX only needs to handle front-end KYC/AML, avoiding direct responsibility for securities issuance.

Ondo & Securitize: Alliance and Traditional Digital Securities Service Providers

• Ondo leads the "Global Market Alliance," collaborating with Solana Foundation, BitGo, Fireblocks, Jupiter, etc., to build cross-chain, custody, and liquidity standardization solutions.

• Securitize is an early typical player in the digital securities space, primarily providing equity tokenization and qualified investor matching services for traditional enterprises, focusing on the B2B market and not directly targeting retail investors.

Dinari: Attempting to Face Compliance in the U.S.

• Dinari is a U.S.-based team attempting to face U.S. securities regulation by applying for compliance licenses such as Reg D, Reg CF, and ATS (Alternative Trading System), striving to create a truly compliant stock tokenization product called "dShares."

• Unlike Backed, Dinari hopes to provide users with some optional shareholder rights (such as dividends) in the future, but the challenge lies in the extremely high compliance costs in the U.S., requiring long-term investment in brokerage licenses, custody, and legal advisory teams.

• Currently, Dinari primarily follows a B2B route, collaborating with wallets or trading platforms to output stock token products in a white-label format.

Kraken: A Frontline Practitioner of Established Compliance CEX

• Kraken has always positioned itself as a compliant CEX, focusing on the trust of European and American users in licenses and compliance.

• Its xStocks module is linked with Backed: real stock custody is handled by Backed, while Kraken provides matching, listing, wallet, and API integration, with PoR publicly verifiable, transferable on-chain to networks like Solana, and can be combined with LP/DEX for secondary liquidity.

• Kraken places particular emphasis on compliance boundaries, implementing measures such as IP blocking and timezone KYC restrictions for U.S. users to avoid crossing SEC red lines.

Bybit: Dual-Track Hybrid, Balancing Spot and Derivatives

• The biggest difference from Kraken is that Bybit operates both real stock tokenization and CFD (Contract for Difference) product lines simultaneously.

• CFDs are implemented by Bybit through connecting with external liquidity providers (such as IS Prime, Finalto) and the MT5 system to cover the needs of high-frequency speculative users, earning spreads and fees.

• The real stock path collaborates with Backed to link xStocks (such as AAPLx, TSLAx), serving users who prefer "real stock backing," allowing both customer groups to convert on the platform.

Robinhood: Integrated Chain with Its Own Brokerage

• Robinhood holds a U.S. Broker-Dealer license, which allows it to provide real stock trading and custody services.

• It has built the Robinhood Chain, which tokenizes stock accounts, equipped with its own wallet and trading matching system. Initially, it is testing this in the EU (Robinhood Europe), packaging over 200 stocks and ETFs into token products for EU users to trade, thereby avoiding U.S. regulations.

• Bitstamp provides a liquidity bridge, allowing users to later use the tokens for collateral or to create structured products in DeFi scenarios.

• This "brokerage internal chain" solution enables Robinhood to create a fully closed loop from issuance, custody, to matching and liquidity, significantly enhancing retention and data control. However, it requires strong compliance backing and financial investment, making it difficult for small to medium players to replicate in the short term.

Republic: Focused on Non-Public Rare Equity

• Unlike other projects that focus on publicly traded stocks, Republic places its tokenization emphasis on rare equity in private companies (such as SpaceX, OpenAI), typically using a Special Purpose Vehicle (SPV) note model, allowing retail investors to indirectly invest in equity targets that are otherwise hard to access.

• The risk lies in the fact that some private equity tokens may have authorization issues; for instance, OpenAI has stated that the related products launched on Robinhood Europe were not authorized, and the SEC has already begun an investigation.

This article is from a submission and does not represent the views of BlockBeats.

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