In-Depth Report on Tokenized Stocks: Unleashing the Second Growth Curve of the Bull Market

I. Introduction and Background

Over the past year, the concept of tokenizing real-world assets (RWAs) has steadily evolved from a fringe narrative in fintech to a mainstream discourse in the crypto market. The widespread adoption of stablecoins in payments and clearing, along with the rapid rise of on-chain treasury bonds and note-based products, has turned the "tokenization of traditional assets" from an idealized vision into a living experiment. In this trend, tokenized stocks, often referred to as "on-chain U.S. stocks", have emerged as one of the most controversial yet promising sectors. Beyond ambitions to enhance liquidity and trading timeliness in traditional securities markets, they seek to test regulatory boundaries and explore cross-market arbitrage opportunities. For the crypto industry, this represents a generational leap of channeling trillions of dollars of assets into the on-chain world. For traditional finance, it feels like an "unauthorized" technological breakthrough, which promises efficiency revolutions while sowing the seeds of governance conflicts.

II. Market State & Key Pathways

Although "tokenization" has become one of the crypto industry's most important medium- to long-term narratives, the tokenization of stocks as a specific asset class remains slow, with highly divergent pathways. Unlike standardized assets such as treasury bonds, short-term notes, and gold, the tokenization of stocks entails far more complex challenges, such as legal ownership, trading timeliness, voting rights, and dividend distribution mechanisms. As a result, related products currently available in the market vary considerably in their compliance pathways, financial structures, and on-chain implementation methods.

One of the earliest projects to bear fruit in this space is Backed Finance. The Swiss-based fintech company has collaborated with regulated securities custodians to issue ERC 20 tokens backed by real-world stocks and ETFs, aiming to build a "bridge for on-chain securities". Take its best-known product, wbCOIN, as an example. The token is claimed to be pegged 1:1 to Coinbase's actual shares listed on NASDAQ and is redeemable through custodians Alpaca Securities and InCore Bank, theoretically forming a full-cycle mechanism of "subscription–holding–redemption". Backed has also launched tokens targeting NVIDIA (BNVDA), Tesla (BTESLA), and the S&P 500 ETF (BSPY), leveraging chains such as Base and Polygon as circulation carriers to provide investors with access to trade these assets on-chain. However, reality has yet to match the ideal. As of March 2025, the combined total value locked (TVL) of Backed's multiple stock-backed tokens remained below USD 10 million, and wbCOIN saw average daily trading volumes of less than USD 4,000, with activity often dropping close to zero. The reasons are multifaceted; Early users are concerned about the uncertainties surrounding redemption mechanisms, the DeFi ecosystem struggles to deeply integrate these tokens, and some on-chain market makers doubt these assets' long-term liquidity prospects. This means that even with clear asset mapping and robust custodial chains, a lack of trading depth, use cases, and user awareness can leave tokenized U.S. stocks in a predicament of "compliant yet deserted".

Compared with Backed, Robinhood has taken a more conservative yet systematic approach to tokenization. A platform long known for its cautious expansion into crypto, Robinhood chose to launch regulated stock derivative tokens in the EU. These tokens are not representations of real stocks but are derivative instruments that track prices issued under an EU Multilateral Trading Facility (MTF) license. Their design is closer to traditional Contracts for Difference (CFDs), where traders do not actually hold the underlying stocks but instead gain rights and obligations tied to price fluctuations. Though sacrificing the on-chain "1:1 peg to real-world stocks", this design significantly reduces regulatory friction and custody complexity, thus offering a compromise of "non-security but tradable" products. Robinhood provides services such as full UI support, asset fractionalization, dividend distribution, and leverage options, and leverages its own custodial account system to safeguard user interests. More importantly, its planned Layer 2 network (tentatively named "Robinhood Chain") signals that Robinhood is integrating tokenized stocks into its native wallet and crypto trading platform as an "application chain". This top-down, closed-loop ecosystem may be more beginner-friendly, but it also limits the openness of asset circulation. Right now, trading hours remain constrained by the schedule of the European financial market, which means its on-chain nativeness is still insufficient.

Comparatively, the xStocks ecosystem launched by Kraken and its partners offers an alternative vision. Built on the Solana chain and underpinned by asset tokens provided by Backed, it bypasses U.S. regulations through a structured compliance framework and makes its products available to non-U.S. markets worldwide. The most salient feature of xStocks lies in its "DeFi-native" trading experience: All tokens are tradable 24/7 with T+0 settlement, on-chain swaps, and stablecoin market-making. In theory, it can plug seamlessly into existing DeFi tool chains such as lending, perpetuals, and cross-chain liquidity bridges. This system also seeks to build trading depth through on-chain liquidity pools and forge initial connections with Solana native DEXs like Orca and Jupiter. This on-chain native, globally distributed, and composable model undoubtedly embodies the "ultimate vision" of tokenized stocks, that is, not merely creating price-mapping products, but building a truly hybrid market that seamlessly integrates traditional financial assets with crypto infrastructure. However, xStocks still faces major hurdles in limited user reach, mandatory KYC verifications for actual subscriptions and redemptions, and unresolved questions surrounding whether its custody framework has cross-border legal enforceability. Moreover, although its trading experience and mechanisms meet "crypto‑native" standards, neither user base nor on‑chain liquidity has achieved economies of scale, as a result of which mainstream adoption is still a long way away.

The different strategies adopted by these three players show that there is no unified standard for tokenized stocks, and each builds around its own strengths, regulatory environment, and ecosystem resources. Specifically, Robinhood emphasizes "a regulated traditional trading experience with a crypto wrapper"; Backed stresses "on-chain futures that map real-world assets"; and Kraken leans toward "building a crypto native-liquidity market". Their contrasting paths highlight both the diversity of this sector and a defining feature of a still-maturing market: No one can fully address compliance, asset mapping, and user demand all at once, leaving time and market feedback to weed out weaker projects and screen out the fittest.

It can be said that tokenized stocks are still in a very early experimental phase. Despite having a theoretically closed loop, their on-chain activity and financial efficiency remain far below expectations. Beyond the soundness of the product design, their future trajectory hinges on the convergence of three key factors: First, whether they can attract more genuine liquidity participants into their trading pools to form price discovery mechanisms; second, whether they can integrate into more diverse DeFi applications, thereby expanding the use cases of tokenized stocks; and third, whether there are clearer regulatory boundaries, which would give platforms the confidence to scale their services, particularly to U.S. users. Until these pathways come together, tokenized stocks remain more of a financial experiment with enormous potential than a growth engine capable of fulfilling bull-market expectations in the near term.

III. Compliance Mechanisms and Implementation Capacity

In all discussions of tokenized stocks, regulation hangs overhead like the sword of Damocles. As one of the most tightly regulated classes of financial assets, stocks are bound by strict legal requirements in all aspects, including issuance, trading, custody, and clearing, within their respective jurisdictions. In traditional finance, securities must be registered or granted exemptions before they can be legally sold, and trading venues must also acquire relevant licenses, such as exchange or ATS (Alternative Trading System) licenses. Rebuilding these securities as "on-chain assets" means addressing not only the technical challenge of mapping but also establishing clear and enforceable compliance pathways. Otherwise, even the most refined product design would struggle to break out of its limited user base, remain unmarketable to qualified investors, and may even face the legal risk of issuing unauthorized securities. In this regard, projects differ sharply in their choices, which will ultimately determine whether they can achieve large-scale adoption.

Take Backed Finance as an example. Its compliance approach is closest to the "traditional securities issuance model". The tokenized stocks it issues are essentially restricted securities recognized by Swiss regulators. This means that buyers must complete KYC/AML verifications, promise not to sell to U.S. investors, and face restrictions limiting transfers to qualified investors only in secondary markets. While this approach is relatively robust in terms of compliance and steers clear of the U.S. SEC's red lines, it also results in constrained liquidity, thus unable to deliver the vision of trading tokens freely on public blockchains. A more practical challenge is that every transfer under this "restricted security" model must undergo compliance verification, severely undermining its composability with DeFi systems. In other words, even though Backed has successfully established custody and mapping relationships between tokens and real stocks via InCore Bank and Alpaca Securities, what it has built remains an enclosed ecosystem within a regulatory sandbox, struggling to support high-frequency trading, collateralization, and leverage in open finance settings.

Robinhood has opted for a more ingenious compliance wrapper. Its tokenized stock products do not directly map real stocks; instead, they are "securities derivatives" structured under the EU MiFID II regulatory framework, functioning similarly to CFDs, with quotes, custody, and clearing supported by Robinhood's regulated subsidiaries. This design shields Robinhood from the legal liabilities that would come with holding actual stocks and avoids the complications of peer-to-peer trading and physical delivery, enabling it to offer related products without a securities license. The main advantage of this approach lies in its high regulatory certainty, allowing Robinhood to quickly list multiple tokenized stocks of underlying assets and market them to its existing user base. However, this comes at the cost of these assets' lack of programmability and openness, and thus, they cannot truly integrate into native on-chain financial protocols. At its core, this "platform custody + derivative tracking" model belongs to the CeFi (centralized finance) realm. The issuance and clearing of its assets occur almost entirely within Robinhood's system, and users' trust in the underlying assets is built upon the platform rather than on-chain autonomous custody and verification mechanisms.

In the case of Kraken and xStocks, we see a more radical, almost fundamentalist approach to compliance. While the tokenomics behind xStocks is technically supported by Backed, it follows a circulation and usage model of "on-chain autonomy and global access for non-U.S. users" that operates in a regulatory gray zone. Specifically, this model leverages exemptions for "restricted securities and private offerings" in Swiss law, allowing Kraken to make its tokenized products tradable in non-U.S. markets worldwide while restricting access for U.S. IPs via on-chain futures. This structure sidesteps direct SEC and FINRA scrutiny over securities issuance and exchange operations while preserving tokens' ability to circulate freely on-chain, enabling them to be integrated with DeFi lending protocols, AMMs, cross-chain bridges, and other modules. This forms a relatively complete, closed financial loop. Nonetheless, the risk associated with this pathway lies in its heavy reliance on technical barriers that allow access only from "non-U.S. users". Once a significant number of users bypass these barriers, it could still be deemed "offering illegal securities to U.S. investors", thus triggering enforcement risks. Moreover, U.S. regulators often determine "de facto market participation" not merely by technical barriers but by outcomes and the actual nationality of investors. As such, despite its best efforts, Kraken may still experience regulatory audits or even sanctions.

At a macro level, none of the three, Backed, Robinhood, or Kraken, has achieved truly global compliance coverage with their tokenized stock offerings. Instead, they all rely on the strategy of "jurisdictional arbitrage and operations within legal gray zones". This essentially stems from the starkly divergent definitions of securities worldwide. For example, in the U.S., the SEC still classifies any tokenized instrument pegged to real-world equity value as a security, and its issuance must be subject to the Howey Test or exemptions such as Reg A / Reg D. In contrast, the EU takes a more lenient approach, allowing certain derivative‑structured tokens to trade under the oversight of MTFs or the DLT Pilot Regime. Meanwhile, countries like Switzerland and Liechtenstein attract projects to conduct pilot issuances through sandbox frameworks and dual registration systems. This regulatory fragmentation creates ample room for institutional arbitrage, leaving the actual implementation of tokenized stocks "regionally compliant but globally gray".

Against this complex backdrop, the mass adoption of tokenized stocks will depend on breakthroughs in three key areas. First, regulatory consensus and exemption channels must be established. It is essential to develop legitimate, replicable compliance models for tokenized securities similar to frameworks such as the EU's MiCA, the UK's FCA sandbox, and Hong Kong's VASP regime. Second, on-chain infrastructure must provide native support for compliance modules, including standardized tools such as KYC modules, whitelist transfers, and on-chain audit tracking, so that compliant securities can truly integrate into DeFi systems rather than remain isolated liquidity silos. Third, institutional participation is critical, especially the coordinated involvement of financial intermediaries, such as custodial banks, auditing firms, and brokers, to address concerns over the authenticity of assets and the credibility of redemption mechanisms.

It is safe to say that the compliance mechanism is not an ancillary issue for tokenized stocks but the pivotal variable in their ultimate success. No matter how decentralized a project may be, its foundation rests on whether the on-chain mapping of real-world assets is trusted, and the core issue behind this remains whether existing legal frameworks can accommodate this new paradigm. This is why when we study tokenized stocks, we must go beyond mechanism innovations and technical architecture to also grapple with the boundaries and trade-offs of institutional evolution, seeking a viable middle ground between regulatory realities and on-chain ideals.

IV. Market Analysis and Future Outlook

The total value of on-chain real-world assets (RWAs) worldwide currently stands at around $17.8 billion, of which tokenized stocks account for only $15.43 million, just 0.09% of the total. However, tokenized stocks have grown more than threefold in just six months, rising from $50 million in July 2024 to approximately $150 million in March 2025.

When we re-examine the actual performance of tokenized stocks, it becomes clear that while the concept sounds extremely appealing, the barriers to real-world adoption remain formidable. In theory, tokenized stocks enjoy obvious structural advantages: On the one hand, they map some of the most valuable, widely recognized real-world assets onto the blockchain, providing genuine credit anchors for the crypto ecosystem; on the other hand, they enable automated trading and real-time settlement through smart contracts, overturning the fundamental logic that the traditional securities market depends on centralized clearinghouses and T+2 cycles, thereby unlocking significant systemic efficiencies. Yet in practice, these strengths have not translated into mass adoption. Instead, this sector remains stuck in an awkward situation of "established mechanisms, missing use cases, and shallow liquidity". This prompts us to ponder: What is the true growth engine for tokenized stocks? Could they become a core asset class in crypto finance, like stablecoins or on-chain bonds, in the future?

Structurally, the primary value of tokenized stocks lies in bridging real-world and on-chain markets, but genuine incremental demands must come from three key user groups: The first is retail investors seeking to bypass traditional financial institutions and access global stock markets at lower entry costs. The second is high-net-worth individuals and gray capital aiming to move assets across borders while avoiding capital controls or time-zone restrictions. The third consists of DeFi protocols and market makers focused on arbitrage and structured yields. Together, these groups define the "potential market" for tokenized stocks, though none have entered at scale. Retail investors are often inexperienced at on-chain operations and remain doubtful about whether tokens can truly be redeemed for the underlying stocks; high-net-worth individuals are still unconvinced that such assets provide adequate privacy protection and risk-hedging features; and DeFi protocols prefer building structured products around high-frequency trading, stablecoins, and derivatives, showing little interest in stock-based assets lacking volatility and liquidity. This means that tokenized stocks are facing a classic market misalignment where financial assets are ready to move on-chain, but on-chain users are not yet ready to embrace them.

Even so, a turning point may gradually emerge as several key trends unfold. First, the rise of stablecoins has laid a solid monetary foundation for trading and settling tokenized stocks. As stablecoins such as USDC, USDT, and PYUSD become the "digital dollars" of on-chain liquidity, tokenized stocks naturally gain a universal counterparty asset. This allows users to trade U.S. stocks on-chain without relying on the banking system, lowering entry barriers and capital conversion costs, which is especially crucial for users in developing countries. Second, as DeFi protocols mature, they are gradually building the capacity to incorporate "traditional assets on-chain". With the advent of tokenized treasuries and tokenized money market funds, the market has grown far more receptive to "non-native crypto assets on-chain", and stocks are undoubtedly the next standardized asset class to be integrated. If on-chain portfolio tools incorporating stocks, bonds, and stablecoins can be created in the future, they will be extremely attractive for institutional investors and may evolve into "on-chain ETFs or index funds" akin to traditional brokerages.

Another variable that should not be overlooked is the explosive growth of L2 and application-chain ecosystems. As Ethereum Layer 2 networks such as Arbitrum, Base, Scroll, and ZKSync expand their user bases, and high-performance chains like Solana, Sei, and Sui become increasingly financial-native, tokenized stocks are no longer confined to isolated issuance platforms on-chain. Instead, they can be deployed directly on chains with deep liquidity and solid developer foundations. For example, if Robinhood's Robinhood Chain successfully integrates the trading data and capital flows of its hundreds of millions of users, while combining compliant on-chain wallets and KYC custody tools, it could theoretically create a hybrid financial model that merges a "centralized user experience with on-chain asset architecture" in a closed-loop ecosystem, thus driving both the actual usage frequency of tokenized stocks and the sophistication of financial portfolios. Meanwhile, projects like xStocks within the Solana ecosystem may gain structural advantages in scenarios such as arbitrage, perpetuals, and phased investment thanks to their high-frequency trading capabilities and low transaction fees.

At the same time, from a macro-financial cycle, the emergence of tokenized stocks coincides with a pivotal stage in the deeper convergence of global capital markets and the crypto market. With spot Bitcoin ETFs gaining approval and RWAs becoming a focus for traditional institutions' on-chain strategies, the crypto world is shifting from an "island economy" to a "globally compatible asset system". Against this backdrop, stocks are undoubtedly a symbolic point of connection. As investors seek more flexible, efficient, and 24/7 cross-border allocation tools, tokenized U.S. stocks could become a key springboard for global capital flows. This explains why traditional asset management giants such as Franklin Templeton and BlackRock are exploring new structures, including security tokens and on-chain investment funds, as they aim to lay the groundwork for the next phase of changes in market structure.

Tokenized stocks will still be bound by real-life constraints in the short term. Liquidity remains scarce, user education costs are high, compliance pathways are fraught with uncertainty, and the asset-mapping mechanism incurs significant trust costs. More critically, no leading project has yet established a clear first-mover advantage to become a standardized asset of protocol components like USDC, WBTC, or sDAI. As a result, the market is still in its exploratory phase, with each project experimenting with different approaches to overcoming the dual challenges of compliance and usability. However, standardization and large-scale adoption will require both time and patience.

However, for precisely this reason, tokenized stocks may be at a "severely underestimated early starting point". They do not directly serve a monetary function like stablecoins or have native network effects like ETH or BTC. However, their ability to "map real-world assets on-chain" is increasingly seen as a key piece linking the two systems. The projects with true breakout potential in the future may not be a new class of asset but rather "compliant, integrated platforms" that bring together asset custody, trade matching, KYC verification, on-chain portfolio management, and off-chain clearing. Their objective is not to replace traditional brokers entirely but to become the "Web3 compatibility layer" of the global financial system. Once such a platform builds a sufficient user base and secures infrastructure support, tokenized stocks will evolve from being merely a narrative into a fundamental component of on-chain capital markets.

V. Conclusion and Recommendations

Looking back at the evolution of tokenized stocks, we can clearly observe a classic cycle where "technology advances first, regulation lags behind, and the market waits". This technology is neither newly invented nor an esoteric issue of financial engineering. Its underlying mechanism –– mapping real-world stocks through on-chain assets to enable 24/7 global trading and composability –– has already been fully demonstrated both technically and financially. The real challenge is not whether the mechanism works, but how it can take root and grow steadily amid the complex regulatory contexts, financial infrastructure, and market inertia in the real world. In other words, the reason tokenized stocks have yet to achieve explosive growth is not because they are not good enough, but because they are not yet mature or usable enough, and have yet to hit that strategic inflection point where policy windows align with financial demand.

However, this situation is quietly shifting. On the one hand, traditional capital markets are rapidly warming up to blockchain. From Blackstone's on-chain funds to JPMorgan's on-chain settlement networks and BlackRock's Ethereum-based RWA infrastructure, the message is clear: real-world assets are steadily moving on-chain, and the financial infrastructure of the future will not be a binary opposition of "traditional finance versus crypto" but an integrated middle ground. Within this larger trend, stocks, as one of the most mature real-world assets, are inherently valuable for on-chain mapping. On the other hand, the crypto-native ecosystem itself is evolving from pure speculation into a phase of structural development. From stablecoins and lending protocols to on-chain treasuries and ETFs, users are demanding greater "stability, liquidity, and compliance" of assets. Tokenized stocks, as an asset class, can bridge this gap –– They embody the credit backbone of the real world while being able to integrate into smart contracts and DeFi modules through tokenization, forming an integral part of on-chain investment portfolios.

In this light, tokenized stocks are more than just an "interesting narrative". They represent a sector offering mid- to long-term opportunities grounded in genuine demand, potential for policy maneuvers, and feasible technical pathways. For industry practitioners, here are a few clear directions to consider.

First, projects entering the tokenized stock field must prioritize "the design of compliance paths", rather than technical innovation or user experience optimization, above anything else. Projects with real potential to thrive are platforms that can build legal and compliant issuance structures and on-chain trading mechanisms in friendly jurisdictions such as Switzerland, the EU, the UAE, and Hong Kong. Technology sets the foundation, but regulation defines the boundaries, with compliance being the true moat for growth.

Second, the essence of asset tokenization lies in "infrastructure-level asset issuance". This means that the value of tokenized stocks does not depend on whether a specific stock is popular, but on whether the system can plug into a wider range of on-chain protocols and become a standardized asset component. Therefore, tokenized stock projects must actively integrate with various DeFi protocols and enable composable products like "rTSLA-backed loans", "aAAPL perpetual futures", and "SPY ETF token restaking". Otherwise, they will be reduced to "conceptual tools" in low-frequency trading scenarios, even with compliance and custody in place.

Third, user education and product design are equally important. On-chain stock trading cannot keep operating with barriers so high that only professionals can make sense of them. Instead, it must actively learn from platforms such as Robinhood, eToro, and Interactive Brokers, adopting more familiar UI language, simplifying trading workflows, and visualizing return structures to minimize entry barriers and truly bring traditional investors into the crypto world. For average users, the logic of buying shares of AAPL with an on-chain wallet is far more compelling than understanding whether the underlying custody structure relies on a CSD.

Lastly, policy engagement and regulatory dialogue must be preemptive, especially in regions like Hong Kong, Abu Dhabi, and London, which are actively advancing RWA policy innovation. It is essential to establish self-regulatory industrial organizations, standardized technical templates, and pilot regulatory sandboxes. Whether tokenized stocks will ultimately succeed hinges not on building increasingly sophisticated asset wrappers but on convincing policymakers that this is a "controllable, incremental, and beneficial financial innovation", rather than yet another disruption or challenge to the existing financial order.

In conclusion, tokenized stocks are a contentious proposition. They link the oldest forms of financial assets with the newest technological paradigms, representing a collective aspiration for "the liberalization of capital flows" and "the reconstruction of financial infrastructure". In the short run, they face a marathon that tests regulation, understanding, and trust; but in the long term, they could become the "third pillar" of on-chain financial progress, after stablecoins and on-chain treasuries. This is not just hype but a deep-water zone, one of the few areas truly worth long-term participation and investment over 3 to 5 years. If the underlying logic of the next bull market is the "on-chain real-world economy", then tokenized stocks could well become the most tangible, value-anchored, and controversial breakthrough.

For investors and institutions, we recommend considering the following for short-term, medium-term, and long-term investments:

Short term: Focus on product launches, TVL, market-making mechanisms, on-chain trading data, and regulatory updates (e.g., MiCA, SEC guidance).

Medium term: Assess whether platforms have introduced perpetuals, leverage mechanisms, and DeFi support, as well as on-chain indicators such as capital costs and liquidity efficiency.

Long term: Pay attention to whether U.S. users gain trading access, how T+0 settlement integrates with compliance mechanisms, and how capital is redistributed between on-chain funds, altcoins, and new assets.

In summary, tokenized U.S. stocks are a "vital experiment" in reshaping the crypto market's structure. Though they have yet to deliver breakout trading volumes, they are laying the groundwork for the next round of bull market. If compliance openness, on-chain trading depth, and mechanism innovation can come together, this "new wine in an old bottle" could become the key engine driving the next wave of growth in the crypto market.