Can the tokenization of US stocks become the next trend? A detailed explanation of its history, current situation, and future direction.

Author | @Web3_Mario

Abstract: As Trump’s policies are being implemented one by one, attracting manufacturing back through tariffs, actively triggering stock market bubbles to force the Federal Reserve to cut interest rates and inject liquidity, and then promoting financial innovation to accelerate industrial development through deregulation policies, this set of combinations is genuinely changing the market. Among them, the RWA track under the favorable deregulation policies is also increasingly attracting the attention of the crypto industry. This article mainly introduces the opportunities and challenges of tokenized stocks.

Overview of the development history of tokenized stocks

In fact, tokenized stocks are not a new concept. Attempts at STOs (Security Token Offerings) began in 2017. The so-called STO is a fundraising method in the cryptocurrency field, which essentially digitizes and chains the rights of traditional financial securities, achieving the tokenization of assets through blockchain technology. It combines the compliance of traditional securities with the efficiency of blockchain technology. As an important category of securities, tokenized stocks are the most notable application scenario in the field of STO.

Before the emergence of STO, the mainstream financing method in the blockchain field was ICO (Initial Coin Offering). The rapid rise of ICO mainly relied on the convenience of Ethereum smart contracts, but most tokens issued by projects did not represent real asset rights and lacked regulation, leading to frequent fraud and project disappearances.

In 2017, the U.S. SEC (Securities and Exchange Commission) issued a statement regarding the DAO incident, indicating that certain tokens may be considered securities and should be regulated under the Securities Act of 1933. This marked the official emergence of the STO concept. In 2018, STO gradually gained popularity as a concept of “compliant ICO,” attracting attention from the industry. However, due to reasons such as a lack of unified standards, poor liquidity in the secondary market, and high compliance costs, market development has been slow.

With the arrival of DeFi Summer in 2020, some projects began to experiment with decentralized solutions to create derivatives linked to stock prices through smart contracts, allowing on-chain investors to directly invest in the traditional stock market without the need for complex KYC processes. This paradigm is often referred to as the synthetic asset model, which does not directly hold US stocks and allows trading without trusting centralized institutions, thereby bypassing expensive regulatory and legal costs. Representative projects include Synthetix and the Mirror Protocol of the Terra ecosystem.

In these projects, market makers can mint on-chain synthetic US stocks by providing excess cryptocurrency collateral and provide market liquidity, while traders can directly trade these assets in the secondary market within the DEX, gaining price exposure to the pegged stocks. It is worth remembering that at that time, the stock that was flourishing in the US stock market was Tesla, not Nvidia from the previous cycle. Therefore, most project slogans highlighted the selling point of directly trading TSLA on-chain.

However, judging from the final market development, the trading volume of synthetic U.S. stocks on the chain has been unsatisfactory. Taking sTSLA on Synthetix as an example, counting the minting and redemption in the primary market, the total cumulative on-chain transactions are only 798. Later, most of the projects claimed that due to regulatory considerations, they would remove synthetic assets from the U.S. stock market and turn to other business scenarios, but the essential reason is likely to be that they did not find PMFs and could not establish a sustainable business model, because the premise of the business logic of synthetic assets is that there is a large demand for on-chain transactions, attracting market makers to mint assets through the primary market and earn fees for market making in the secondary market, and if there is no such demand, market makers will not only be unable to obtain income through synthetic assets. At the same time, it also has to bear the risk exposure brought by synthetic assets, which is short-anchored to U.S. stocks, so liquidity will also shrink further.

In addition to the synthetic asset model, some well-known CEXs are also experimenting with the ability to trade U.S. stocks for crypto traders through a centralized custody model. This model has a third-party financial institution or exchange that escrows the actual stock and creates a tradable underlying directly in the CEX. The more typical ones are FTX and Binance. FTX launched its tokenized stock trading service on October 29, 2020, partnering with German financial firm CM-Equity AG and Switzerland’s Digital Assets AG to allow users in non-US and restricted regions to trade tokens pegged to shares of U.S.-listed companies, such as Facebook, Netflix, Tesla, Amazon, and others. In April 2021, Binance also began offering tokenized stock trading services, with Tesla (TSLA) being the first to list.

However, the regulatory environment at that time was not particularly friendly, and the core initiator was CEX, which meant a direct competitive relationship with traditional stock trading platforms like Nasdaq, naturally leading to considerable pressure. The trading volume of tokenized stocks on FTX reached a historic high in the fourth quarter of 2021. The trading volume in October 2021 was $94 million, but after its bankruptcy in November 2022, its tokenized stock trading services were halted. Binance, just three months after launching this business, also announced the cessation of tokenized stock trading services in July 2021 due to regulatory pressure.

Since then, as the market entered a bear market phase, the development of this sector has also once been in a state of stagnation. Until Trump’s election, his deregulation financial policies brought about a shift in the regulatory environment, re-igniting the market’s attention towards tokenized stocks. However, by this time, it had a new name: RWA. This paradigm emphasizes the introduction of compliant issuers to issue tokens on-chain that are 1:1 backed by real-world assets through a compliant framework design, and the creation, trading, redemption of tokens, as well as the management of the backing assets, are all strictly executed according to regulatory requirements.

Current market status of the stock RWA

So let’s take a look at the current state of the stock RWA market. Overall, the market is still in its early stages and is still dominated by U.S. equities. According to RWA.xyz, the current stock RWA market has a total issuance of $445.40M, but it is worth noting that $429.84M of that issuance is attributed to an underlying EXOD, an on-chain stock issued by Exodus Movement, Inc., a software company focused on developing self-custodial cryptocurrency wallets, which was founded in 2015 and is headquartered in Nebraska, USA. The company’s shares are listed on the NYSE America Stock Exchange and allow users to migrate their regular Class A shares to the Algorand blockchain for management, and users can view the price of these on-chain assets directly on the Exodus Wallet, which currently has a total market capitalization of $1.5B.

The company has also become the only one in the United States to tokenize its common stock on the blockchain. However, it is important to note that the on-chain EXOD is merely a digital identifier of its stock on the blockchain and does not include voting, governance, economic, or other rights. Additionally, this Token cannot be directly traded or circulated on the chain.

This event is somewhat symbolic, marking a clear shift in the SEC’s attitude towards on-chain equity assets, and in fact Exodus’ attempt to issue on-chain shares has not been smooth sailing. In May 2024, Exodus submitted its first application for the tokenization of common shares, but the initial rejection of the listing plan was due to the fact that the SEC’s regulatory policy did not change at that time. But then, in December 2024, after continuous improvement of technical solutions, compliance measures, and information disclosure, Exodus finally received SEC approval and successfully completed the listing of common stock tokenization. The incident also sent the company’s stock into a cult market with prices reaching all-time highs.

In addition, the remaining approximately $16M of market share is mainly attributed to a project called Backed Finance. This is a Swiss company that operates through a compliant architecture that allows users who meet KYC requirements to mint on-chain stock tokens through its official primary market, pay USDC, and after receiving crypto assets, exchange back to USD, and buy COIN shares in the secondary market, (there may be some delays due to stock market opening hours in the middle), after the purchase is successful, the shares are managed by a Swiss custodian bank, and then 1:1 mint bSTOCK token is sent to users. The redemption process is reversed. The Reserve Asset Security Guarantee is a regular release of Reserve Certificates in partnership with an audit firm called Network Firm. On-chain investors can purchase such on-chain stock assets directly through DEXs such as Balancer. In addition to this, Backed does not provide ownership of the underlying assets or any other additional rights, including voting rights, to holders of stock tokens. And only users who have passed KYC can redeem USDC through the primary market.

In terms of issuance volume, the adoption of Backed is mainly concentrated on two assets, CSPX and COIN, with the former having an issuance volume of about $10M and the latter around $3M. In terms of on-chain liquidity, it is mainly concentrated on the Gnosis and Base chains, with bCSPX having a liquidity of about $6M and wbCOIN having a liquidity of about $1M. As for trading volume, it is not very high; for example, the largest liquidity pool of bCSPX has accumulated a trading volume of about $3.8M and approximately 400 transactions since its deployment on February 21, 2025.

Another noteworthy trend is the progress of Ondo Finance, as Ondo announced its overall strategy for Ondo Chain and Ondo Global Markets on February 6, 2025. Tokenized stocks are the core trading assets in its Ondo Global Markets. Perhaps with broader TradFi resources and a better technical background, Ondo can accelerate the development of this sector, but it still remains to be seen.

Opportunities and Challenges of RWA in Stocks

Next, let’s discuss the opportunities and challenges of stock RWA. Generally, the market considers that stock RWA has the following three advantages:

· 7-24 hour trading platform: Due to the technical characteristics of blockchain, it has the capability to operate around the clock. This allows trading of tokenized stocks to break free from the restrictions of traditional exchange trading hours, fully tapping into potential trading demand. Taking Nasdaq as an example, although it has currently achieved the capability for 24-hour trading services through extended pre-market and after-hours trading, regular trading hours are still limited to weekdays. However, by directly developing a trading platform through blockchain, around-the-clock trading can be realized at a lower cost.

· Low-cost access to U.S. assets for non-U.S. users: With the widespread adoption of payment stablecoins, non-U.S. users can trade U.S. assets directly using stablecoins, without incurring the transaction costs and time delays associated with cross-border fund transfers. For instance, if a Chinese investor invests in U.S. stocks through Tiger Brokers, the cross-border remittance fee is approximately 0.1% when not considering currency exchange costs, and the settlement usually takes 1-3 working days. However, if trading is conducted through on-chain channels, both of these costs can be avoided.

· The financial innovation potential brought by composability: With programmable features, tokenized stocks will embrace the DeFi ecosystem, giving them stronger on-chain financial innovation potential. For example, scenarios like on-chain lending.

However, the author believes that tokenized stocks currently face two uncertainties:

· Speed of regulatory policy: Based on the cases of EXOD and Backed , we can know that the current regulatory policy does not well solve the problem of “equal rights for shares”, that is, the purchase of tokenized shares and physical shares have the same rights and interests at the legal level, such as governance rights, etc. This restricts many transaction scenarios, such as mergers and acquisitions through the secondary market. And the compliance use scenarios for tokenized stocks are still unclear, which also hinders the pace of financial innovation to a certain extent. Therefore, its progress is very dependent on the speed of regulatory policy, and considering that the core policy goal of the current Trump administration is still in the stage of reshoring of manufacturing, the timeline is likely to continue to move back.

· The adoption rate of stablecoins: From past developments, the core target users of tokenized stocks are likely not crypto-native users, but traditional non-American investors in U.S. stocks. For this group, whether the adoption rate of stablecoins is increasing is also a question worth noting, which closely relates to the stablecoin policies of other countries. For example, for Chinese investors, obtaining stablecoins through the OTC market incurs a premium of around 0.3% to 1% compared to regular official channels for currency exchange, which is also significantly higher than the cost of investing in U.S. stocks through traditional channels.

Therefore, in summary, the author believes that there are the following two market opportunities for stocks RWA in the short term:

For listed companies, they can issue on-chain stock tokens by referring to the case of EXOD, although there are not many practical use scenarios in the short term, but at least the potential financial innovation ability can be given by investors who are willing to give the company a higher valuation. For example, for some enterprises that can provide on-chain asset management business, this method can be used to transform the identity of investors into product users, and the stocks held by investors into AUM of enterprises, so as to enhance the company’s business growth potential.

For tokenized high-dividend U.S. stocks, some yield-based DeFi protocols become potential users. With the reversal of market sentiment, the yield of most on-chain native real yield scenarios will drop significantly, and yield DeFi protocols like Ethena need to constantly look for other real yield scenarios in order to increase the overall yield and improve market competitiveness. For details, please refer to Ethena’s example of configuring BUIDL. High-dividend stocks, on the other hand, usually belong to mature industries, have a stable profit model, abundant cash flow, and can continue to distribute profits to shareholders, and most of them have the characteristics of low volatility, strong resistance to economic cycles, and relatively controllable investment risks. Therefore, the launch of some high-dividend blue-chip stocks may lead to the adoption of yield-based DeFi protocols.