Stock Tokenization Depth Research Report: Opening the Second Rise Curve of the Bull Run

1. Introduction and Background

In the past year, the tokenization of real-world assets (RWA) has shifted from a marginal narrative to mainstream visibility. Whether it is the widespread use of stablecoins in payment and settlement or the rapid rise of on-chain government bonds and bill products, the "traditional assets on-chain" has turned from an ideal into reality. In this trend, the tokenization of stocks, referred to as "U.S. stocks on-chain," has become one of the most controversial and promising tracks. It not only involves the transformation of liquidity and trading efficiency in the traditional securities market but also challenges regulatory boundaries, opening up arbitrage opportunities across markets. For the crypto industry, this could represent a cross-generational leap that brings trillion-level assets onto the chain; for traditional finance, it is an unauthorized technological breakthrough that brings both an efficiency revolution and potential governance conflicts.

2. Market Status and Key Pathways

Although tokenization has become an important narrative in the crypto industry, the progress in implementing it in stocks remains slow and the paths are clearly differentiated. Unlike standardized assets, stock tokenization involves more complex legal ownership, transaction timeliness, voting rights, and dividend mechanism design, resulting in significant discrepancies among several products currently in the market regarding compliance paths, financial structures, and on-chain implementations.

Backed Finance has achieved results in this field earlier. This Swiss fintech company has launched multiple ERC-20 tokens backed by real stocks and ETFs by collaborating with regulated securities custodians, attempting to establish "an intermediary bridge for on-chain securities." Taking wbCOIN as an example, this token is pegged 1:1 to Coinbase's Nasdaq stock, with the custodian promising to redeem it for real stocks, theoretically creating a complete closed loop. However, the total TVL of multiple stock token products launched by Backed has not exceeded 10 million dollars, with a very low daily trading volume. The reasons for this situation include users' uncertainties about the redemption mechanism, the DeFi ecosystem not being fully integrated, and market makers lacking long-term liquidity expectations.

Robinhood has taken a more conservative yet systematically stronger approach. It has launched regulated stock derivative tokens in the EU, essentially price tracking tools based on the EU MFT license, which are closer to traditional CFDs. This design sacrifices the purity of "1:1 anchoring to real stocks" but significantly reduces regulatory conflicts and custody complexities. Robinhood offers complete UI support, asset splitting, dividend distribution, and plans to launch a native Layer-2 network to embed tokenized stocks into its wallet and trading platform.

In contrast, the xStocks ecosystem launched by Kraken and its partners offers an alternative path. This solution is based on Solana and utilizes Backed for underlying asset tokens, circumventing U.S. regulation through a structured compliance approach aimed at global non-U.S. markets. The most notable feature of xStocks is the "DeFi-ization" of trading attributes: 24/7 trading, T+0 settlement, on-chain swaps, and market making with stablecoins. This system attempts to gather trading depth through on-chain liquidity pools and connects with Solana's native DEX. This on-chain native, globally distributed, and composable attribute represents the "ultimate vision" of tokenized stocks. However, xStocks currently faces issues such as limited user coverage, ongoing KYC reviews, and the lack of a definitive conclusion regarding the cross-border legal validity of its custody path.

From the layout differences of these three, it is evident that there is currently no unified standard for stock tokenization, with each designing its path based on advantages, regulatory environment, and ecological resources. Robinhood emphasizes "a regulated traditional trading experience combined with crypto packaging", Backed emphasizes "on-chain tool contracts that map real assets", while Kraken leans towards "building a crypto-native liquidity market". This diversification not only showcases the possibilities of the track but also reveals typical characteristics of an immature market: it is difficult to fully balance compliance, asset mapping, and user needs, and it still requires time for testing and market feedback to filter.

3. Compliance Mechanism and Implementation Capability

In the discussion of stock tokenization, regulation always hangs overhead like the sword of Damocles. Stocks, as strictly regulated financial assets, are bound by the laws of their respective jurisdictions at every stage. Reconstructing securities as "on-chain assets" not only requires solving technical mapping issues, but also necessitates a clear and executable compliance path. Otherwise, even if the product design is excellent, it will be difficult to overcome limited usage scope, the inability to promote to qualified investors, and even the legal risks of illegal securities issuance.

Backed Finance has adopted an approach that is closest to the "traditional securities issuance logic". Its stock tokens are classified as restricted securities recognized by Swiss regulatory authorities, requiring purchasers to complete KYC/AML checks and commit not to sell to US investors, with secondary market circulation also restricted to "qualified investors only". Although this method is compliant and robust, avoiding the SEC's red line, it brings about issues of limited circulation, making free trading of tokens difficult. The greater challenge lies in the fact that this model requires every transfer to undergo compliance verification, which greatly weakens its composability with DeFi systems.

Robinhood has adopted a more sophisticated compliance packaging. Its tokenization stock products are built on the EU MiFID II regulatory framework as "securities derivatives," technically similar to contracts for difference, with quotes, custody, and clearing support provided by regulated subsidiaries. This design avoids the legal liabilities of directly holding stocks and circumvents issues related to counterparty trading and physical delivery. The advantage lies in high compliance certainty, enabling quick launches of multiple underlying assets, and promotion based on the existing user base; the cost is the lack of programmability and openness of the assets, which cannot truly be embedded in on-chain native financial protocols.

Kraken and xStocks have adopted a more aggressive compliance approach. xStocks utilizes the "restricted securities + private placement" exemption in Swiss law to make its products available for trading in global non-U.S. markets, restricting access to U.S. IPs through on-chain contracts. This method avoids direct scrutiny from the SEC and FINRA while retaining the free circulation characteristics of tokens on the blockchain. However, this path is extremely reliant on the technical isolation of "non-U.S. user identities," and if there is a large-scale circumvention of restrictions, it could be viewed as "offering illegal securities to U.S. investors."

Currently, neither Backed, Robinhood, nor Kraken has achieved true global compliance coverage with their tokenized stock schemes, relying more on a strategy of "regional arbitrage + operating within legal loopholes." This situation stems from the differences in how various countries define the nature of securities. The U.S. SEC still views "any Token based on real equity value anchoring" as a security; the EU is relatively lenient, allowing some tokens based on derivative structures to trade under the MTF or DLT Pilot Regime; countries like Switzerland and Liechtenstein attract pilots with sandbox regulation and a dual registration system. This regulatory fragmentation creates a huge institutional arbitrage space and presents a situation of "regional compliance, global gray area" for tokenized stocks.

To achieve large-scale implementation of stock tokenization in the future, three breakthroughs are needed: first, unification of regulatory understanding and establishment of exemption channels, requiring the design of a legal and replicable compliance template; second, native support of on-chain infrastructure for compliance modules, including standardization of tools such as KYC modules, whitelist transfers, and on-chain audit tracking; third, participation of institutional players, particularly the collaborative efforts of financial intermediaries such as custodial banks, audit firms, and brokerages.

IV. Market Analysis and Future Outlook

The total amount of RWA on the blockchain is approximately $17.8 billion, with stock assets only at $15.43 million, accounting for 0.09%. However, tokenized stocks have grown over 3 times in six months, rising from $50 million to about $150 million from July 2024 to March 2025.

Stock tokenization has significant structural advantages: on one hand, it maps the most valuable and cognitively foundational real assets onto the chain, bringing a real-world credit anchor to the crypto ecosystem; on the other hand, it realizes trading automation and real-time settlement through smart contracts, overturning the logic of the traditional securities market that relies on centralized clearinghouses and T+2 cycles, thus releasing extremely high system efficiency. However, these advantages have not yet translated into large-scale adoption and have long been in a state of "mechanism established, scenarios missing, liquidity dried up."

The potential market for stock tokenization comes from three user groups: retail investors who wish to participate in the global stock market with a low threshold; high-net-worth individuals and gray funds seeking cross-border asset flow and evading capital controls; and DeFi protocols and market makers aiming for arbitrage and structured returns. Currently, there is no single group that has entered on a large scale. Retail investors lack experience with on-chain operations and have little confidence in the redemption mechanism; high-net-worth users have not confirmed whether the assets provide sufficient privacy protection and hedging attributes; and DeFi protocols tend to focus on building structured products around high-frequency trading, stablecoins, and derivatives.

Future turning points may emerge with several key trends. Firstly, the rise of stablecoins provides a solid monetary foundation for the tokenization of stock trading and settlement. Secondly, the maturation of DeFi protocols gradually establishes the ability to combine "on-chain traditional assets". If a on-chain investment portfolio tool that includes "stocks + bonds + stablecoins" can be formed in the future, it will be highly attractive to institutional users. Another variable is the explosion of L2 and application chain ecosystems, providing on-chain residences for stock tokens with deep liquidity and a developer base.

From a macro financial cycle perspective, the tokenization of stocks coincides with a critical stage in the further integration of global capital markets and the cryptocurrency market. With the approval of Bitcoin ETFs and RWA becoming a key focus for traditional institutions on-chain, the crypto world is transitioning from a "island economy" to a "global asset compatible system." Stocks are the most symbolic connection point and may become the core springboard for the global flow of capital.

In the short term, stock tokenization still faces constraints such as liquidity scarcity, high user education costs, uncertain compliance paths, and high trust costs in asset mapping mechanisms. There has not yet been a leading project with a "clear first-mover advantage", lacking standard assets that can become protocol components like USDC and WBTC.

However, stock tokenization may be at a "severely underestimated early starting point". The projects that truly have explosive potential in the future may be a "compliance-integrated platform" that can integrate asset custody, trading matching, KYC verification, on-chain portfolios, and off-chain settlement, becoming the "Web3 compatible layer" of the global financial system. When such a platform has sufficient user volume and infrastructure support, stock tokenization will become a core component of on-chain capital markets.

5. Conclusion and Recommendations

The tokenization of stocks demonstrates a typical cyclical phenomenon of "technology leading, compliance lagging, and the market waiting." Its mechanism logic is fully substantiated in both technological and financial dimensions, but the real issue lies in how to find a feasible path within the complex regulatory context, financial infrastructure, and market inertia.

This situation is changing. On one hand, the acceptance of blockchain by traditional capital markets is rapidly increasing, and real-world assets are gradually being tokenized on the chain. In the future, financial infrastructure will be a hybrid intermediary. On the other hand, the crypto-native ecosystem is transitioning from pure speculation to a structural construction phase, with users demanding higher "stability, liquidity, and compliance" for assets, and stocks can play a bridging role in this.

Advice for industry practitioners:

1. Make "compliance path design" the top priority, building a legal and compliant issuance structure and on-chain trading mechanism in friendly jurisdictions.

2. Actively connect with DeFi protocols to promote the implementation of composite products and become standard asset components.

3. Focus on user education and product packaging, introduce familiar UI language, simplify the trading process, and lower the barriers to use.

4. Advance policy participation and regulatory dialogue to promote the formation of industry self-regulatory organizations, technical standard templates, and pilot regulatory sandboxes.

Suggestions for investors and institutions:

• Short term: Focus on product launch, TVL, market making mechanism, on-chain transaction data, regulatory dynamics.
• Mid-term: Evaluate whether the platform has added perpetual contracts, leverage mechanisms, DeFi support, as well as indicators such as capital costs and liquidity efficiency.
• Long-term: Focus on the opening of trading permissions for U.S. users, the integration path of T+0 and compliance mechanisms, as well as the trend of capital redistribution between on-chain funds and new assets.

In summary, the tokenization of US stocks is an important experiment in the structural transformation of the cryptocurrency market, and is paving the way for the next