Key Takeaways:
A growing number of crypto-native platforms are courting traditional finance, with $23.3 billion of real-world assets issued on-chain.
Exchanges such as Kraken and Binance have adopted tokenized versions of popular U.S. stocks like Apple and Tesla.
Some analysts say tokenized stocks have strong potential in crypto, while others believe they’ll only succeed if they focus on high-risk, fast-moving equities.
Kraken is launching xStocks — tokenized versions of popular U.S. stocks like Apple, Nvidia, and Tesla — blending crypto with traditional finance in the ever-expanding sphere of real-world assets (RWA) coming to the blockchain.
Now, as crypto exchanges increasingly court traditional finance, can tokenized stocks thrive where past attempts have failed? Can they draw in “degen” traders known for their appetite for high-risk, high-volatility investments?
“Tokenized stocks have strong potential in crypto due to their ability to offer fractional ownership, 24/7 trading, and enhanced liquidity on blockchain platforms,” Ryan Lee, chief analyst at Bitget, told Cryptonews.
Tokenized securities are digital versions of regular shares, which can be traded on the blockchain. In Kraken’s case, the over 50 tokens and exchange-traded funds (ETFs) on offer are issued on the Solana blockchain.
Each xStock token reflects the price of its real-world counterpart, backed by actual shares held in custody by Backed Finance, Kraken’s partner for the venture.
For example, one token for Apple (xAAPL) would track the Nasdaq price of the AAPL stock and can be redeemed 1:1 for cash.
Investors don’t have to hold the shares directly, only tokens that represent ownership of the securities. Kraken says its tokens will not be available to U.S. customers and will be sold in select markets outside America.
The U.S.-based crypto exchange is not the first platform to offer tokenized stocks. Bybit recently announced the launch of its own tokenized shares. Binance, the world’s largest cryptocurrency exchange, tried it in 2021 but soon ditched the project under pressure from Hong Kong regulators.
Is there an Appetite for Tokenized Stocks in Crypto?
Tokenized stocks have yet to gain widespread adoption in cryptocurrency, but proponents say the products have the potential to change the way people invest in financial markets in a big way. As Lee, the Bitget analyst, notes:
“There is growing market appetite for such products [tokenized shares], driven by retail investors seeking accessible and flexible exposure to traditional equities.”
Sam MacPherson is the CEO and co-founder of Phoenix Labs, the company behind the DeFi lending protocol Spark. He says tokenized equities “turn static, closed-market instruments into composable building blocks for the on-chain economy.”
“This [Kraken’s move] unlocks 24/7 global access, real-time settlement, and entirely new financial use cases,” MacPherson told Cryptonews, adding:
“The financial use cases could include everything from collateralized lending to automated portfolio strategies. It’s a huge step toward a unified financial system where TradFi [traditional finance] and DeFi [decentralized finance] markets operate seamlessly together.”
But not everyone shares the same enthusiasm, at least not at the outset. Georgii Verbitskii, founder of DeFi crypto service Tymio, is cautious about the sort of assets that will resonate with crypto traders.
In an interview with Cryptonews, Verbitskii said tokenized stocks could succeed if listings are tailored to the preferences of cryptocurrency investors, focusing on what he described as “momentum-driven or non-correlated assets.”
“While the concept is promising, actual demand will depend heavily on which assets are listed,” Verbitskii said. “On crypto-native platforms, there is likely to be more interest in high-volatility, hype-driven equities,” he observed, adding:
“Names like GameStop or other meme stocks, rather than traditional blue chips like Nvidia or Microsoft, which tend to be less volatile and thus less attractive to the typical crypto trader [will gain interest].”
In recent years, retail crypto investors have tended to favor assets with meme-driven narratives or speculative upside.
For example, meme stock influencer Keith Gill, a.k.a “Roaring Kitty” on X and YouTube and “DeepF***ingValue” on Reddit’s popular WallStreetBets, rose to fame after placing bullish bets on GameStop. The bets sparked a trading frenzy among retail investors, including those in crypto.
At some point in January 2021, shares of GameStop soared 1,600% following Gill’s social media posts, crushing hedge funds that had shorted the Texas-based videogame retailer.
The mania, which also extended to other meme stocks like AMC Entertainment, often spilled over into the crypto market as traders launched new meme coins inspired by GameStop, AMC, and others.
Tokenized Stocks Target $250B Market Amid Regulatory Challenges
Verbitskii believes tokenized commodities such as gold or silver will likely “generate stronger interest” than tokenized stocks in crypto.
“These assets appeal to investors seeking diversification or a hedge, and there’s already precedent,” he said, citing the crypto exchange FTX, which offered perpetual gold futures before its spectacular collapse in 2022.
Kraken’s move into tokenized securities is a renewed push to bridge crypto and TradFi but success could well hinge on whether it complies with regulatory demands in the regions it will offer xStocks, according to experts.
Binance’s attempts at tokenized stock offerings in 2021 failed mainly due to compliance issues, specifically the lack of a license to trade securities. Hong Kong regulators also queried the exchange’s custody arrangements.
Analysts say in the absence of public trust, tokenized stocks become a regulatory time bomb. For Kraken, the partnership with Backed Finance, a regulated tokenization platform, is meant to preempt such concerns.
“xStocks were designed from the ground up to address these [regulatory] challenges,” Adam Levi, co-founder of Backed told Cryptonews in response to emailed questions.
“They are fully collateralized 1:1 with underlying equities and issued under a MiFID II-compliant EU prospectus, complete with detailed investor disclosures and governed by a clear legal and regulatory structure. This brings institutional-grade rigor to a tokenized format.”
Levi added that xStocks, as offered by Kraken, are issued in compliance with the regulatory requirements of Jersey, Switzerland, and the European Union (EU).
He believes the demand for tokenized equities “will grow substantially over time.” Levi expects the sub-sector to follow a growth pattern similar to that of stablecoins, expanding into a $250 billion market within a few years. He said:
“The infrastructure is ready, the demand is building, and the shift is underway.”
Democratizing Real-World Assets
The new product from Kraken is a test of the ability of crypto firms to innovate within the guardrails of regulation — something once considered sacrilegious in Bitcoin (BTC). A few companies have already started offering tokenized equities.
It includes Allo, a Dubai-based tokenized stock exchange that has tokenized $2.2 billion of real-world assets, including 11,000 U.S. stocks and exchange-traded funds. Users can buy on-chain stocks of Bitcoin firm Strategy, Tesla, Alphabet, and others.
Allo CEO Kingsley Advani says the company has also tokenized more than 1,000 companies planning to go public via an initial public offering (IPO), including Elon Musk’s SpaceX, OpenAI, and Anthropic.
“Investors benefit from faster access to these assets with lower minimum investment thresholds, democratizing real-world assets,” Advani told Cryptonews.
Source: RWA
He noted that tokenization had improved liquidity on his platform, market access for small investors, as well as settlement speeds.
For example, fractionalization — division of stocks into smaller, tradable tokens — “lowers the capital required to invest, enabling a broader range of investors to participate,” Advani said.
Transactions can now be settled in “seconds or minutes,” compared to the minimum two business days in old brokerage models. “This reduces counterparty risk and improves capital efficiency,” said the Allo CEO.
Advani did not say exactly whether Allo had encountered any regulatory pushbacks, either from the U.S. or EU authorities, except to boast about a “robust compliance team” with regulatory experience in America.
According to the RWA website, there are currently a total of $23.3 billion of real-world assets issued on-chain. That’s a growth of nearly 6% over the past 30 days, the data shows.
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