Stock Tokenization Depth Research Report: Start of the Second Bull Run Growth Curve

I. Introduction and Background

Over the past year, the concept of tokenization of real-world assets (RWA) has gradually shifted from the fringes of fintech narratives to the mainstream view of the crypto market. Whether it is the widespread application of stablecoins in payment and settlement, or the rapid growth of on-chain government bonds and note products, the idea of "traditional assets on-chain" has transformed from an idealized vision into a real-world experiment. In this trend, stock tokenization, referred to as “U.S. stocks on-chain,” has become one of the most controversial yet promising areas. It not only embodies attempts to transform the liquidity and trading timeliness of traditional securities markets but also challenges regulatory boundaries and opens up cross-market arbitrage opportunities. For the crypto industry, this could be a generational leap that brings trillion-dollar asset pools into the on-chain world; for traditional finance, it resembles a "permissionless" technological breakthrough, bringing both a revolution in efficiency and laying the groundwork for governance conflicts.

2. Market Status & Key Path

Although "tokenization" has become one of the most important medium- to long-term narratives in the cryptocurrency industry, its progress in the specific asset class of "stocks" remains slow, with significant divergence in pathways. Unlike standardized assets such as government bonds, short-term notes, and gold, the tokenization of stocks involves more complex legal ownership issues, trading timeliness, voting rights design, and dividend distribution mechanisms. This has resulted in several products currently on the market displaying clear distinctions in compliance pathways, financial structures, and on-chain implementation methods.

A project that achieved early results in this field is Backed Finance. This Swiss-based fintech company has launched several ERC-20 tokens backed by real stocks and ETFs through partnerships with regulated securities custodians, attempting to establish an "on-chain securities intermediary bridge." Taking its more well-known product wbCOIN as an example, this token claims to be pegged 1:1 to real shares of Coinbase on NASDAQ and is promised to be redeemable for real shares by custodians Alpaca Securities and InCore Bank, theoretically possessing a closed-loop logic of "subscription-holding-redeeming." Backed has also launched multiple tokens backed by companies like NVIDIA (BNVDA), Tesla (BTESLA), and the S&P 500 ETF (BSPY), using chains like Base and Polygon as circulation carriers to provide investors with an on-chain trading entry. However, there remains a gap between ideals and reality. As of March 2025, the total value locked (TVL) of multiple stock token products launched by Backed has not exceeded $10 million, and the daily trading volume of wbCOIN has even fallen below $4,000, with transaction records approaching zero during most periods. The reasons for this situation are not singular; there are uncertainties among early users regarding the redemption mechanism, the DeFi ecosystem has failed to fully connect with the real-world challenges of these tokens, and some on-chain market makers have judged these assets as "not having long-term liquidity expectations." This means that even if the product mechanism has achieved clarity in asset mapping and completeness in the custodial chain, a lack of trading depth, usage scenarios, and user awareness may still cause the tokenization of U.S. stocks to fall into a predicament of being "compliant but quiet."

Compared to Backed, Robinhood's tokenization path appears to be more conservative but systematic. As a platform that has cautiously laid out its crypto business for a long time, Robinhood has chosen to launch regulated stock derivative tokens in the EU. These tokens do not essentially map to real stocks but are price-tracking derivatives based on the EU MFT (Multilateral Trading Facility) license. The underlying logic is closer to traditional CFDs (Contracts for Difference), where traders do not actually hold the underlying stocks but rather hold rights and obligations related to price fluctuations. Although this design sacrifices the on-chain purity of "1:1 pegging to real stocks," it significantly reduces regulatory conflicts and custodial complexity, thus achieving a compromise solution of "non-securities but tradable." Robinhood provides complete UI support, asset splitting, dividend distribution, leverage settings, and other services, and secures user rights through its custodial account system. More importantly, its future plan to launch a Layer-2 network (tentatively named Robinhood Chain) also means that Robinhood is embedding tokenized stocks into its native wallet and crypto trading platform in an "application chain" manner. This top-down constructed closed-loop ecosystem may be more suitable for new users to get started, but it also limits the openness of asset circulation, and the current trading hours are still restricted by the opening hours of the European financial market, with insufficient on-chain native characteristics.

In contrast, the xStocks ecosystem launched by Kraken and its partners offers another path to envision. This solution is based on the Solana chain and is backed by underlying asset tokens provided by Backed, circumventing U.S. regulations through a structured compliance approach, opening the product to global non-U.S. markets. The most notable feature of xStocks is its "DeFi-ification" of trading attributes: all tokens can be traded 24/7, featuring T+0 settlement, on-chain swaps, and market-making with stablecoins, theoretically integrating into existing DeFi toolchains such as lending, perpetual contracts, and cross-chain liquidity bridging. The system also attempts to gather trading depth through on-chain liquidity pools and establish initial connections with Solana-native DEXs such as Orca and Jupiter. This on-chain native, globally distributed, and composable attribute undoubtedly represents the "ultimate vision" of tokenized stocks, which is not just to create price-mapping products but to build a truly integrated cross-market that combines traditional financial assets with crypto infrastructure. However, the biggest challenge for xStocks currently lies in its limited user coverage, the need for KYC verification for real subscriptions/redemptions, and the uncertain cross-border legal validity of its custody path. In addition, although its trading experience and mechanisms have reached "crypto-native" standards, the actual user scale and on-chain liquidity have yet to achieve scale effects, and there is still a long way to go for mainstream adoption.

From the layout differences among these three, it can be seen that there is currently no unified standard for stock tokenization; rather, each designs its own path based on its advantages, regulatory environment, and ecological resources. Among them, Robinhood emphasizes "a regulated traditional trading experience wrapped in crypto," Backed emphasizes "on-chain tool contracts that map real assets," while Kraken leans more towards "building a crypto-native liquidity market." The different paths of the three not only showcase the diversity of this sector but also reveal a typical characteristic of a still-maturing market: no one can fully cover compliance, asset mapping, and user needs among the three; ultimately, it requires time testing and market feedback to eliminate and select.

It can be said that tokenized stocks are still in a very early experimental stage, and although they have a theoretical closed loop, their on-chain activity and financial efficiency are still far below expectations. The key to their future development depends not only on whether the product design itself is perfect but also on whether three key factors can converge: first, whether more real liquidity participants can enter its trading pool to form a price discovery mechanism; second, whether it can integrate into richer DeFi applications to enhance the use cases of tokenized stocks; third, whether regulations can gradually clarify the boundaries, giving platforms the confidence to expand their service range, especially to cover U.S. users. Until these pathways are fully integrated, tokenized stocks resemble a financial experiment with enormous potential rather than a growth engine that can realize bull market expectations at this stage.

3. Compliance Mechanism and Implementation Capability

In all discussions about tokenized stocks, regulation is always the Damocles sword hanging overhead. As one of the most strictly regulated financial assets, stocks are subject to strict constraints by the laws of the jurisdiction in which they are issued, traded, custodied, and cleared. In traditional finance, securities must be registered or exempted to be sold legally, and trading venues must obtain relevant licenses such as exchanges or ATS (alternative trading systems). Reconstructing these securities as "on-chain assets" means that not only must the technical mapping issue be resolved, but there must also be a clear and executable compliance path. Otherwise, even if the product design is excellent, it will be difficult to break through the limitations of use, to promote it to qualified investors, or even to avoid legal risks associated with illegal securities issuance. In this regard, the choices and differences between different projects are particularly pronounced, and they precisely determine whether they can truly move towards scalable implementation in the future.

Taking Backed Finance as an example, it has adopted a practice that is closest to the "traditional securities issuance logic" in its compliance path. The stock tokens issued by Backed essentially belong to the restricted securities recognized by Swiss regulatory authorities, which means that purchasers of the tokens must complete KYC/AML verification and commit not to sell to U.S. investors, while circulation in the secondary market will also be subject to the "qualified investor only" restriction. Although this approach is relatively robust in compliance, avoiding crossing the red line of the U.S. SEC, it also brings about the issue of restricted circulation, making it impossible to realize the vision of free trading of tokens on public chains. A more realistic challenge is that this "restricted securities" model requires each transfer to undergo compliance verification, greatly diminishing its combinability with DeFi systems. In other words, even if Backed has successfully established a custodial mapping relationship between tokens and real stocks with InCore Bank and Alpaca Securities, what it has built is still a closed ecosystem "within a regulatory sandbox," making it difficult to achieve high-frequency trading, collateralization, leverage, and other applications in open financial scenarios.

The path taken by Robinhood is a more sophisticated compliance packaging. Its tokenized stock products do not directly map to real stocks but are built as "securities derivatives" based on the EU MiFID II regulatory framework, technically similar to contracts for difference (CFDs), and are quoted, custodied, and cleared by its regulated subsidiary. This design allows Robinhood to avoid the legal responsibilities of directly holding stocks and also sidesteps issues related to counterparty trading and physical settlement, enabling it to offer relevant product trading without possessing a securities license. The advantage of this path lies in its higher compliance certainty, allowing for the rapid launch of multiple target stock tokens and promoting them based on its existing user system; however, the cost is that the assets themselves lack programmability and openness, making it impossible to truly embed them in native financial protocols on the chain. Further, this "platform custody + derivative tracking" model essentially remains within the realm of CeFi (centralized finance), as the issuance and clearing of assets almost entirely rely on the internal implementation of the Robinhood system, and users' trust in the underlying assets is still built on trust in the platform, rather than on an autonomous custody and verification mechanism on the chain.

In the case of Kraken and xStocks, we see a more aggressive, fundamentalist approach to compliance. The tokenization mechanism behind xStocks is technically supported by Backed, but it has taken a gray compliance path of "on-chain autonomy + global non-US user access" in terms of circulation and usage. Specifically, this model utilizes the "restricted securities + private placement" exemption clause in Swiss law, allowing Kraken to open trading of its tokenized products to the global non-US market while restricting access for US IPs through on-chain contracts. This approach not only avoids direct scrutiny from the SEC and FINRA regarding securities issuance and exchange regulation, but also retains the characteristic of free circulation of tokens on-chain, enabling access to DeFi lending protocols, AMM market-making, cross-chain bridges, and other modules, thus forming a relatively complete financial closed loop. However, the risk of this path lies in its extreme dependence on the technical isolation of "non-US user identity". If a large number of users bypass the restrictions, it may still be viewed as "offering illegal securities to US investors," triggering enforcement risks. Moreover, US regulators often do not limit their determination of "de facto market participation" to the setting of technical barriers, but instead base it on behavioral consequences and the actual nationality of investors. This also means that even if Kraken tries its best to avoid it, it may still face potential threats of regulatory inspections or even sanctions.

Looking at it from a more macro perspective, currently, whether it is Backed, Robinhood, or Kraken, their tokenized stock schemes have not achieved true global compliance coverage, but rather are more of a strategy of "regional arbitrage + operating within legal loopholes." The fundamental reason for this situation lies in the significant differences in the definition of securities across countries. Taking the United States as an example, the SEC still considers "any token based on real equity value anchoring" as securities, and its issuance must meet the Howey Test or qualify for compliance exemptions such as Reg A / Reg D. In contrast, the European Union is relatively lenient, allowing certain tokens based on derivatives structure to exist for trading under the jurisdiction of MTF or DLT Pilot Regime; as for countries like Switzerland and Liechtenstein, they attract project parties for pilot issuance through sandbox regulation and dual registration systems. This fragmented regulation creates a significant space for institutional arbitrage, and also presents a situation of "regional compliance and global gray areas" for the implementation of tokenized stocks.

In this complex context, the future of stock tokenization can truly achieve large-scale implementation, relying on breakthroughs in three areas. First, there needs to be a unified regulatory understanding and the establishment of exemption channels. A legal and replicable compliance framework must be designed for tokenized securities, similar to systems like the EU MiCA, the UK's FCA sandbox, and Hong Kong's VASP. Second, the on-chain infrastructure must provide native support for compliance modules, including standardization of tools such as KYC modules, whitelist transfers, and on-chain audit tracking, so that compliant securities can be truly integrated into the DeFi system rather than becoming liquidity islands. Third, the participation of institutional players is essential, especially the coordinated efforts of financial intermediaries such as custodial banks, audit firms, and brokerages, to address issues of asset authenticity and the credibility of redemption mechanisms.

It can be said that compliance mechanisms are not just an ancillary issue of stock tokenization, but rather a key variable in its success or failure. No matter how decentralized a project is, its foundation is still built on the logic of "whether real assets can be reliably mapped"; and the core issue behind this is whether the legal framework can accept the existence of new paradigms. For this reason, when studying tokenized stocks, we should not only focus on mechanism innovation and technological architecture, but also understand the boundaries and compromises of institutional evolution, finding a viable middle path between regulatory realities and on-chain ideals.

4. Market Analysis and Future Outlook

The total on-chain amount of global RWA (Real World Assets) is approximately 17.8 billion USD, with stock-type assets accounting for only 15.43 million USD, which is just 0.09% of the total scale. However, tokenized stocks have grown more than 3 times in six months, from July 2024 to March 2025, increasing from 50 million USD to ~150 million USD.

When we re-examine the actual performance of tokenized stocks in this track, it is not difficult to find that it has strong conceptual appeal but also faces extremely complex reality landing thresholds. From a theoretical perspective, stock tokenization has obvious structural advantages: on one hand, it maps the most valuable and cognitively based real assets onto the blockchain, bringing real-world credit anchors to the crypto ecosystem; on the other hand, it achieves transaction automation and real-time settlement through smart contracts, subverting the fundamental logic of traditional securities markets that rely on centralized clearinghouses and T+2 cycles, thus releasing extremely high system efficiency. However, in practice, these advantages have not yet translated into large-scale adoption, but rather have long been in an awkward state of "mechanisms established, scenes missing, and liquidity drying up." This also forces us to think further: what is the real growth engine of stock tokenization? Is it possible that it could become a core asset class in crypto finance like stablecoins or on-chain bonds in future markets?

Structurally, the primary value of stock tokenization lies in "connecting the real market with the on-chain market". However, the real incremental demand must come from three user groups: first, retail investors who wish to bypass traditional financial institutions and participate in the global stock market with lower barriers; second, high-net-worth individuals and gray capital seeking cross-border asset flows to avoid capital controls or time zone restrictions; third, DeFi protocols and market makers aiming for arbitrage and structured returns. These three groups together shape the "potential market" for tokenized stocks, but currently, none of them are entering on a large scale. Retail investors often lack experience with on-chain operations and are uncertain about the mechanism of "whether it can be redeemed for real stocks"; high-net-worth users have not confirmed whether such assets have sufficient privacy protection and hedging attributes; while DeFi protocols tend to focus on building structured products around high-frequency trading, stablecoins, and derivatives, showing limited interest in stock-like assets that lack volatility and liquidity. This indicates that stock tokenization currently faces a typical market misalignment issue where "financial assets want to go on-chain, but on-chain users are not yet ready to accept them".

Even so, future turning points may gradually emerge with several key trends. First, the rise of stablecoins provides a solid monetary foundation for the trading and settlement of tokenized stocks. As USDC, USDT, PYUSD, and other stablecoins become the "digital dollar" of on-chain liquidity, stock tokens naturally acquire a universal counterparty asset for trading. This allows users to conduct U.S. stock-related transactions without accessing the banking system, lowering the entry barriers and capital switching costs, which is particularly important for users in developing countries. Second, the maturity of DeFi protocols gradually establishes the ability to manage "on-chain traditional assets". With the emergence of tokenized government bonds, tokenized money market funds, and other assets, the market's acceptance of "on-chain non-crypto native assets" has significantly increased, and stocks are undoubtedly the next standard asset type expected to be integrated. If a tool for on-chain investment portfolios that includes "stocks + bonds + stablecoins" can be formed in the future, it will have great appeal for institutional users and may even evolve into a "on-chain ETF/index fund" similar to traditional brokerages.

Another variable that cannot be ignored is the explosion of L2 and application chain ecosystems. With the expanding user base of Ethereum Layer 2 networks such as Arbitrum, Base, Scroll, and ZKSync, as well as the enhanced financial native characteristics of high-performance chains like Solana, Sei, and Sui, the "on-chain residence" of stock tokens is no longer limited to isolated asset issuance platforms, but can be directly deployed on chains with deep liquidity and a developer base. For example, if Robinhood's Robinhood Chain successfully integrates the trading data and capital flows of its hundreds of millions of users, along with the compliant establishment of on-chain wallets and the integration of KYC custodial tools, theoretically, a hybrid financial model of "centralized user experience + on-chain asset architecture" can be constructed within a closed-loop ecosystem, thereby promoting the actual usage frequency and the complexity of financial portfolios of stock tokens. Projects like xStocks within the Solana ecosystem may also gain structural advantages in scenarios such as arbitrage, perpetual contracts, and segmented investment due to their high-frequency trading capabilities and low transaction fee advantages.

At the same time, from the perspective of the macro financial cycle, the emergence of stock tokenization coincides with a key stage in the further integration of global capital markets and the crypto market. With the approval of Bitcoin ETFs and RWA gradually becoming a focus for traditional institutions' on-chain layouts, the crypto world is transitioning from an "island economy" to a "global asset-compatible system." In this context, stocks are undoubtedly the most symbolic connection point. Especially as investors begin to seek more flexible, efficient, 24/7 cross-border allocation tools, U.S. stocks existing in token form are likely to become a core springboard for global capital flows. This also explains why traditional asset management giants like Franklin Templeton and BlackRock are researching new structures such as security tokens and on-chain investment funds, as their purpose is to pave the way for the upcoming changes in market structure.

Of course, in the short term, stock tokenization still cannot escape several realistic constraints. Liquidity remains scarce, user education costs are high, compliance pathways are filled with uncertainty, and the asset mapping mechanism still has a high trust cost. More importantly, a leading project with a clear "first-mover advantage" has yet to emerge, lacking standard assets that can become protocol components like USDC, WBTC, and sDAI. This means that the current market is still in an exploratory phase, with each project attempting to tackle the dual challenges of compliance and usability in different ways, but it will take time and patience to reach standardization and scaling.

However, precisely because of this, stock tokenization may be at a "severely undervalued early stage." It does not directly assume monetary functions like stablecoins, nor does it possess the native network effects of ETH or BTC, but its ability to represent "on-chain mapping of the real world" is becoming a key piece connecting the two major systems. The projects that truly have explosive potential in the future are likely not a new type of asset, but a "compliance integration platform" that can integrate asset custody, trading matching, KYC verification, on-chain portfolios, and off-chain settlement. Its goal is not to completely replace traditional brokerages, but to become the "Web3 compatible layer" of the global financial system. When such a platform has sufficient user volume and infrastructure support, stock tokenization will not just be a narrative, but will become a core component of the on-chain capital market.

V. Conclusion and Recommendations

Looking back at the development of stock tokenization, we can clearly see a typical cyclical phenomenon of "technology first, compliance lagging, and the market waiting." This technology is not a recent invention, nor is it a complicated financial engineering issue. The underlying mechanism logic—mapping real stocks onto on-chain assets, allowing for global, 7 × 24 hour trading and portfolio capabilities—has sufficient justification in both technological and financial dimensions. However, the real issue is not whether the mechanism itself is feasible, but how this mechanism can find a viable path to take root and expand steadily within the complex regulatory context, financial infrastructure, and market inertia of the real world. In other words, the reason stock tokenization has not yet experienced explosive growth is not that it is not "good" enough, but rather that it is not yet "mature" enough, not yet "usable" enough, and has not truly hit a strategic node where a policy window and financial demand intersect.

But this situation is quietly changing. On one hand, the acceptance of blockchain by traditional capital markets is rapidly increasing, from Blackstone's on-chain fund to JPMorgan's on-chain settlement network, and to BlackRock's leading Ethereum on-chain RWA infrastructure, all of which are sending a strong signal: real-world assets are gradually moving on-chain, and the future financial infrastructure will no longer be a binary opposition of "traditional versus crypto," but rather a blended middle ground. In this major trend, stocks, as one of the most mature real assets, naturally have significant on-chain value mapping. On the other hand, the crypto-native ecosystem itself is also transitioning from pure speculation to a phase of structural development, with attempts ranging from stablecoins and lending protocols to on-chain government bonds and ETFs, users are beginning to demand higher standards for the "stability, liquidity, and compliance" of assets, and the asset class of stocks happens to play a bridging role in this — it not only represents the credit foundation of the real world but can also be tokenized and embedded into smart contracts and DeFi modules, becoming an important component of on-chain investment portfolios.

Therefore, stock tokenization is not just an "interesting narrative," but a medium-to-long-term opportunity track with a real demand foundation, policy game space, and technological implementation path. For industry practitioners, there are several clear suggested directions.

First of all, when projects enter the field of stock tokenization, they must prioritize "compliance path design" over technological innovation or user experience optimization. The projects that truly have the opportunity to grow and strengthen will be those that can build a legally compliant issuance structure and on-chain trading mechanism in friendly jurisdictions such as Switzerland, the EU, the UAE, and Hong Kong. Technology is only a prerequisite; the system is the boundary, and compliance is the moat for growth.

Secondly, the essence of asset tokenization is "infrastructure-level asset issuance," which means that its value does not depend on whether a particular stock is popular, but rather on whether the entire system can interface with more on-chain protocols and become a standard asset component. Therefore, tokenized stock projects must actively connect with various DeFi protocols to promote the realization of composite products such as "rTSLA mortgage," "aAAPL perpetual contracts," and "SPY ETF token re-staking." Otherwise, even with compliance and custody, they can only become "conceptual tools" in low-frequency trading scenarios.

Again, user education is just as crucial as product packaging. On-chain stock trading cannot continue to maintain its current high barrier of entry that is only understandable by "professional players." Instead, it should actively learn from platforms like Robinhood, eToro, and Interactive Brokers by introducing familiar UI language, simplified trading processes, and visualized profit structures, thereby minimizing the user barriers to the greatest extent and truly bringing traditional investors into the crypto world. For ordinary users, the logic of being able to buy one share of AAPL with an on-chain wallet is far more attractive than understanding whether the underlying custodial structure is based on CSD.

Finally, policy participation and regulatory dialogue must be prioritized, especially in regions like Hong Kong, Abu Dhabi, and London that actively promote RWA policy innovation. It is essential to foster the formation of industry self-regulatory organizations, technical standard templates, and pilot regulatory sandboxes. Whether the tokenization of stocks ultimately succeeds depends not on the ability to construct more complex asset packaging structures, but on whether policymakers can be convinced that this is a "controllable, incremental, and beneficial financial innovation," rather than yet another disruption and challenge to the existing financial order.

In conclusion, the tokenization of stocks is a proposition full of tension. It connects the oldest financial assets with the latest technological paradigms, representing a collective demand for "capital flow liberalization" and "financial infrastructure reconstruction." In the short term, it will still be a test of endurance in terms of regulation, cognition, and trust; but in the long run, it may become the "third pillar" in the development process of on-chain finance, following stablecoins and on-chain government bonds. This is not a hype hotspot, but a deep water area, a direction that is truly worth long-term participation and investment over a 3-5 year cycle. If the fundamental logic of the next bull market is "on-chain real economy," then the tokenization of stocks is likely to be the most concrete, valuable, and regulatory controversial breakthrough.

For investors & institutions, we recommend considering the following three aspects: short-term, medium-term, and long-term.

Short-term: Focus on product launch, TVL, market-making mechanisms, on-chain transaction data, and regulatory dynamics (such as MiCA, SEC guidelines).

Mid-term: Evaluate whether the platform adds perpetual contracts, leverage mechanisms, DeFi support, as well as on-chain indicators such as funding costs, liquidity efficiency, etc.

Long-term: Focus on whether trading permissions are open for US users, the path of integrating T+0 implementation with compliance mechanisms, and the trend of capital redistribution between on-chain funds and altcoins/new assets.

In conclusion, the tokenization of US stocks is an "important experiment" in the structural transformation of the crypto market. Although there is currently no explosive trading volume, it is accumulating the underlying foundation for the second bull market. If compliance openness, on-chain depth, and mechanism innovation can converge, this "old wine in a new bottle" may become the key engine driving the next wave of growth in the crypto market.