Tokenized stocks are technically feasible, but face challenges in compliance, asset custody, and market acceptance.

Written by: 1912212.eth, Foresight News

On May 22, the all-crypto exchange Kraken announced a partnership with Backed Finance to launch a tokenized stock and ETF trading service called "xStocks," covering over 50 U.S. listed stocks and ETFs, including Apple, Tesla, and Nvidia. In recent years, the integration of blockchain technology with traditional finance has accelerated, with cryptocurrency exchanges becoming pioneers of this transformation. The previous movement of tokenizing dollars and government bonds is now being pushed by exchanges towards U.S. stocks.

Strategic Expansion

Founded in 2011, Kraken is one of the oldest cryptocurrency exchanges in the world, known for its security and compliance. In recent years, as competition in the crypto market has intensified, Kraken has continuously expanded its business boundaries. In 2024, Kraken acquired the futures trading platform NinjaTrader and launched traditional trading services for over 11,000 U.S. stocks and ETFs in certain states in the U.S.

Tokenized stocks refer to the conversion of traditional stock or ETF rights into digital tokens through blockchain technology, with each token representing a portion of ownership of the underlying asset. These tokens can be traded 24/7 on the blockchain, breaking through the trading time and geographical limitations of traditional stock markets. Kraken's xStocks is based on the Solana chain and plans to open to non-U.S. customers, covering markets in Europe, Latin America, Africa, and Asia. Backed Finance is responsible for acquiring and custodian the underlying stocks, ensuring that each token is pegged 1:1 to the real asset, allowing holders to redeem the cash value of the tokens at any time.

This initiative is not an isolated event. By 2025, global cryptocurrency exchanges are accelerating their penetration into traditional finance. For example, Bybit recently announced support for USDT trading of 78 global high-quality stock assets, covering tech giants (such as Microsoft and Google), consumer goods companies (such as Coca-Cola), and energy firms (such as ExxonMobil). Users can trade using the stablecoin USDT, enjoying the advantages of low barriers and high liquidity. Industry trends indicate that tokenized assets are becoming a bridge between cryptocurrency exchanges and traditional finance.

History of Tokenized U.S. Stocks at FTX and Binance

The concept of tokenized stocks is not new; cryptocurrency exchanges began exploring this area around 2020, with FTX and Binance being the most representative practices. FTX, founded in 2019, was once the third-largest cryptocurrency exchange globally, known for its innovative products. In 2020, FTX launched tokenized stock trading, allowing users to trade digital tokens of U.S. stocks like Tesla and Apple on its platform. These tokens were provided by FTX's Swiss subsidiary Canco GmbH and were linked to real stocks held by third-party brokers. FTX's tokenized stocks supported fractional trading, allowing users to purchase portions of stocks for as little as $1, significantly lowering the investment threshold. Additionally, FTX also attempted to tokenize ETFs, such as the SPDR S&P 500 ETF (SPY).

However, FTX's tokenized stock business was limited by compliance issues and market volatility. In November 2022, FTX filed for bankruptcy due to mismanagement of funds and fraud scandals, leading to the termination of its tokenized stock business. Nevertheless, FTX's attempts demonstrated the market demand for tokenized stocks, especially among emerging markets and younger investor groups.

In 2021, Binance also launched tokenized stock trading, initially including stocks like Coinbase and Tesla. These tokens were settled in Binance's stablecoin BUSD and supported fractional trading, aiming to provide a convenient channel for global users to invest in U.S. stocks. However, Binance's tokenized stock business soon faced regulatory resistance. Financial regulators in multiple countries questioned its compliance, believing that tokenized stocks might circumvent the regulatory framework of traditional securities markets. In the same year, Binance announced the termination of this business to focus on core cryptocurrency trading.

The experiences of FTX and Binance indicate that while tokenized stocks are technically feasible, they face challenges in compliance, asset custody, and market acceptance. Kraken's launch of xStocks clearly learns from past lessons, emphasizing cooperation with regulatory agencies and ensuring asset transparency and security through Backed Finance.

Why Exchanges Are Keen on Tokenized Stocks

Cryptocurrency exchanges are actively positioning themselves in tokenized stocks, driven by both technology and market strategy considerations. According to data from April 2025, the total market capitalization of U.S. stocks is approximately $52 trillion, accounting for over 45% of the global stock market size. Such a massive market share has prompted exchanges to expand their user base and capture traditional financial markets. The user base of cryptocurrency exchanges primarily consists of younger, risk-tolerant investors, but the scale of traditional financial markets far exceeds that of the crypto market. Tokenized stocks provide exchanges with an entry point into traditional finance, attracting traditional investors interested in stocks and ETFs. For example, Kraken's xStocks targets non-U.S. customers, precisely identifying investors in emerging markets with strong demand for U.S. stocks but limited by traditional channels.

Moreover, the core advantages of blockchain technology lie in decentralization, transparency, and efficiency. Tokenized stocks leverage blockchain to enable 24/7 trading, instant settlement, and low-cost operations, addressing issues such as limited trading hours and high intermediary fees in traditional stock markets. Additionally, blockchain supports fractional trading, allowing small investors to participate in high-value asset investments, enhancing financial inclusivity.

In the context of intensifying competition among cryptocurrency exchanges, tokenized stocks have become a tool for differentiated competition. Kraken's xStocks not only provides trading functionality but also allows users to use tokens as collateral for DeFi protocols, enhancing the liquidity and application scenarios of assets. This cross-border integration offers users more diversified investment options and can strengthen the ecological stickiness of exchanges.

Impact on Traditional Stock Exchanges

The tokenized stock business of exchanges like Kraken poses a certain challenge to traditional stock exchanges (such as Nasdaq and the New York Stock Exchange), while also bringing opportunities for cooperation and transformation. Traditional stock exchanges typically have trading hours limited to specific periods on weekdays, and cross-border investments involve high fees and settlement cycles. The 24/7 trading and instant settlement characteristics of tokenized stocks directly challenge the operational models of traditional exchanges. Especially in emerging markets, investors may prefer to gain exposure to U.S. stocks through cryptocurrency exchanges rather than traditional brokers.

In response to the impact of blockchain technology, traditional exchanges are not without countermeasures. Institutions like Nasdaq have begun exploring the application of blockchain in securities settlement and clearing. For example, Nasdaq has partnered with R3 to develop an asset management platform based on the Corda blockchain. In the future, traditional exchanges may collaborate with cryptocurrency exchanges to launch their own tokenized products or provide more efficient trading services through technological upgrades.

The rise of tokenized stocks has prompted regulatory agencies to reassess the compliance framework for blockchain finance. This provides traditional exchanges with opportunities to collaborate with regulators to establish industry standards, maintaining market fairness and stability. For instance, the U.S. SEC has recently shown a tendency to ease enforcement actions against cryptocurrency exchanges, indicating a more open attitude towards innovations in blockchain technology.

Conclusion

Kraken's xStocks, Bybit's USDT stock trading, and the early attempts of FTX and Binance collectively outline the evolution trajectory of tokenized stocks. This trend is not only a product of the integration of blockchain technology with traditional finance but also a reflection of the diversification and technology-driven nature of global investment demand. For investors, tokenized stocks offer a more flexible and low-cost asset allocation method; for exchanges, they serve as a strategic weapon for capturing markets and differentiated competition; for traditional stock exchanges, they represent both a challenge and an opportunity for technological upgrades and market expansion.

However, the widespread adoption of tokenized stocks still faces multiple challenges in compliance, technology, and market education. Exchanges like Kraken need to find a balance between innovation and regulation to ensure asset security and user trust. In the future, as blockchain technology matures and the regulatory environment clarifies, tokenized stocks are expected to become an important component of the global financial market.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。