How far are we from a world where everyone can buy U.S. stocks without financial access barriers?

2025-07-25 09:53:37

Collection

If the vision of encryption is to put everything on the blockchain, stocks will undoubtedly be an important piece of the puzzle, and this experiment is worth looking forward to.

Written by: Fishmarketacad

Compiled by: AididiaoJP, Foresight News

Stock tokenization is not a new term, but it has once again become the focus of the market due to Robinhood's announcement of launching U.S. stock tokenization services for European customers and even developing its own L2.

Most people still have a limited understanding of stock tokenization. This article will attempt to comprehensively analyze the basic knowledge of stock tokenization, covering:

The definition and operational mechanism of tokenized stocks
Why do we need tokenized stocks?
Comparison between spot and perpetual contract tokenized stocks
The future of tokenized stocks

1. What are tokenized stocks? How do they operate legally?

Before discussing the differences between spot and perpetual contract tokenized stocks, let's clarify why stock tokenization has gained attention again.

Regulatory and Legal Uncertainty

Although there are technical challenges with tokenized stocks, the legal challenges are even more complex. For years, major jurisdictions like the U.S. have lacked clear rules, forcing crypto companies to provide related services in crypto-friendly regions. The "Crypto Act" provides a clear legal framework for issuing tokenized securities, introducing the legal concept of a bookkeeping system (Wertrecht), allowing securities to be represented by digital records instead of physical stock certificates. The "Crypto Act" provides legal feasibility for tokenizing real-world assets.

Backedfi's Practice

Backedfi issued "bTokens" in Liechtenstein, which are ERC-20 tokens representing fully collateralized tracking stocks. Each bCOIN token corresponds to real stocks held by custodians at Coinbase. This structure isolates the regulated issuance process from the permissionless trading in the secondary market.

Users must complete full KYC/AML to directly mint or redeem bTokens. These tokens can be freely transferred and traded on DEX or a few regulated exchanges. When qualified investors redeem bTokens, the settlement is in cash value rather than the underlying stocks, as Backed brokers will publicly sell the underlying stocks and convert the proceeds into fiat currency or stablecoins like USDC after deducting a small redemption fee. Redeemed bTokens are immediately destroyed to ensure a 1:1 redemption.

bTokens do not confer ownership or voting rights in the stocks; they only represent a contractual claim to the economic value of the underlying stocks. If Backedfi goes bankrupt, the underlying stocks are held by an independent third party, isolated from the company's assets, and bToken holders can recover value as creditors of the issuer through the liquidation process, although this is complex.

Who Can Trade These Tokenized Stocks?

bTokens are regulated under European law (specifically in Liechtenstein and Jersey) and are not registered with the U.S. Securities and Exchange Commission.

Once minted, tokens can be traded permissionlessly on DEX, which should block access for U.S. users. The core challenge is that issuers have clear compliance obligations, but comprehensive access control in the secondary market is difficult to enforce. For U.S. users, circumventing restrictions and trading these tokens remains a high-risk non-compliant activity.

Robinhood's Model

Robinhood's tokenized stocks take a completely different approach by embedding blockchain-related technology into its trading platform, maintaining a centralized, user-friendly interface. Robinhood stock tokens do not represent direct claims to stocks but are derivatives constructed under MiFID II regulations. When users "purchase" stock tokens, they are actually entering into a contract with Robinhood Europe that tracks U.S. stock prices.

The underlying assets are held by U.S. licensed institutions, and the tokens are essentially recorded on the blockchain (initially on Arbitrum, with plans to migrate to a self-developed L2). This structure allows Robinhood to maintain complete control over the assets while providing a good user experience, with key elements including:

Closed ecosystem: Users can buy, sell, and hold tokenized stocks within the Robinhood app but cannot transfer them to external wallets or other platforms, limiting their composability within the DeFi ecosystem.
24/5 trading: Compensating for the time zone differences in trading hours between Europe and the U.S., allowing users to react to market dynamics outside traditional trading hours.
Seamless operations: Automatically handling corporate actions such as stock splits and mergers, cash dividends are paid in euros without exchange rate fees, simplifying the user experience.

Robinhood essentially uses blockchain as an efficient internal ledger, providing exposure to U.S. stock derivatives. This approach prioritizes usability and compliance within its platform over the open ecosystem of DeFi. Although the closed system offers a secure experience for retail users, it sacrifices the composability of DeFi.

By preventing users from transferring their tokenized stocks, these stocks cannot be used as collateral or liquidity in the broader on-chain economy. This presents an opportunity for other platforms to overtake by not only competing for users but also building truly permissionless and interoperable tokenized assets, thus forming the foundation of an open DeFi ecosystem.

Regulatory Summary

Global regulation has given rise to two mainstream models of stock on-chain:

1. Spot Tokenized Stocks

Both Robinhood and Backed.fi adopt this model, where each on-chain token corresponds to real stocks held by custodians. The differences are:

Companies like Backed.fi purchase stocks (e.g., TSLA) and have them held by custodians, minting corresponding tokens (e.g., bTSLA) on the public chain. Tokens can be freely transferred and composed, but only qualified investors can directly mint/redeem.
Robinhood's stock tokens for European customers are derivatives under MiFID II, with the underlying assets held by U.S. licensed institutions, and the tokens are on-chain IOUs that cannot currently be transferred to external wallets.

2. Perpetual Futures

This model does not involve direct ownership of the underlying assets and exists in a legal gray area.

Operationally: Decentralized perpetual contract exchanges face significant legal risks due to the listing of perpetual contracts on stocks. Regulatory bodies in the U.S. and Europe view derivatives based on securities as regulated products requiring specific licenses. To mitigate risks, decentralized perpetual contract exchanges typically register in crypto-friendly jurisdictions and prohibit access for users from restricted countries (like the U.S.).

Both models have their pros and cons, catering to different user needs and risk preferences.

2. Why Do We Need Tokenized Stocks?

Why do we need tokenized stocks? The answer depends on the identity and location of the user.

Bullish Reasons: A More Open Global Market

The strongest argument for tokenized stocks is their potential to democratize financial access globally.

Global financial inclusivity: While participation rates in U.S. and European stock markets are high, only 5-15% of users in other regions can invest in U.S. stocks. Tokenized stocks allow users in Southeast Asia or Latin America to gain exposure to U.S. stocks with just a phone and internet connection, without needing to meet traditional banking capital requirements.
24/7 market access: U.S. stock trading hours are not friendly to Asian users. Tokenized stocks break this limitation, allowing global users to trade according to their strategies.
Permissionless innovation: Tokenized stocks are an open financial primitive, enabling global developers to build new applications based on them, such as self-custody brokerage apps, complex structured products, or automated yield vaults that traditional brokerages cannot achieve.

Bearish Reasons: Niche Products for Developed Countries

For ordinary investors in developed countries, there is no urgent need for tokenized stocks:

Does it solve a real problem? U.S. and European users can directly use low-cost, user-friendly platforms like Robinhood. While the self-custody concept in DeFi is strong, setting up wallets, managing gas fees, and risks of hacks still pose significant barriers for the mainstream market.
Fragmented liquidity: The on-chain trading experience is poor, with high slippage on large orders. Unless on-chain market liquidity approaches that of traditional markets, users will face the risk of impermanent loss.

Currently, the most pressing demand for stock tokenization comes from groups excluded from the traditional financial system. For developed countries, its true value will gradually be released as the DeFi ecosystem matures and the advantages of composability become apparent.

3. Spot vs. Perpetual Contract Tokenization: Utility and Challenges

After understanding the legal applicability and technical structure of on-chain stocks, we can explore the trade-offs users face in practical use. The two main models in the market are:

Asset-backed stock tokens: Represent ownership of stocks
Synthetic perpetual contracts: Designed for capital-efficient trading

While there theoretically exists a third model (such as collateralized spot tokens like Mirror Protocol), its systemic risk due to the support mechanism has prevented it from gaining market acceptance. Therefore, this article focuses on the first two models.

Spot Stock Tokenization: Utility and Challenges

Utility

Currently, on traditional brokerage platforms, users can only use stock portfolios as collateral for margin loans, limiting their use. The core advantage of tokenization lies in its composability, transforming static assets into dynamic "money Legos," enabling use cases unattainable by traditional finance:

Self-yield generation. Users can deposit tokenized stocks into yield vaults, which will collateralize them to lending protocols to borrow stablecoins and automatically compound returns back to the stock holdings, turning passive stock holdings into dynamic income-generating assets.

Permissionless structured products. On-chain protocols can execute complex trading strategies. As tokenized stocks mature, options protocols will emerge, allowing users to execute options strategies by depositing tokenized stocks, gaining independent yield opportunities from the crypto market.

Liquidity provision. Users can pair tokenized stocks with other assets to provide liquidity, earning a share of trading fees (but must bear the risk of impermanent loss).

Facilitating arbitrage and market efficiency. Tokenized stocks build a 24/7 bridge between on-chain and traditional markets. When market makers find significant price discrepancies between on-chain Apple tokens and Nasdaq, they can buy undervalued assets and sell overvalued ones to lock in risk-free profits, pushing prices back and enhancing market liquidity.

Challenges

Significant obstacles still exist in the development path:

Fragmented liquidity. This is the most pressing issue. Currently, the liquidity of tokenized stocks is far from sufficient to support large trades; traditional markets can easily handle million-dollar orders, while a $100,000 trade on-chain can lead to over 1% slippage.

Oracle and market closure issues. DeFi relies on oracles to obtain asset prices, but how to determine the "real price" when traditional markets are closed? For example, during geopolitical turmoil, the price of Pax Gold (PAXG) surged by 20% due to low trading volume. If oracles consider this temporary fluctuation as the "real price," it could trigger a chain liquidation in lending markets and perpetual DEX, creating systemic risk.

Smart contract and technical risks. From token contracts to cross-chain bridges to DeFi protocols, every layer of the tech stack has new potential failure points. Even historically secure protocols like GMX v1 could be attacked years later.

Counterparty and custody risks. Even fully collateralized spot tokens require users to trust the issuer (like Backedfi or Robinhood) and their custodians. While these institutions are regulated, they are not risk-free; if issues arise, users must undergo lengthy legal processes to reclaim asset value.

Corporate action handling. Events such as stock splits, dividend payments, and mergers cannot be executed autonomously on-chain and require centralized operators' intervention.

Perpetual Contract Tokenization: Utility and Challenges

Perpetual contracts do not seek asset ownership but focus on providing purely capital-efficient price exposure, making them the preferred tool for active traders.

Utility

The core advantages of perpetual DEX are concentrated in trading scenarios:

Advanced trading features (leverage and shorting). One-click long and short operations facilitate high-frequency trading.

Capital efficiency and rapid market creation. Unlike spot tokens that require custodianship of millions of dollars in underlying stocks, perpetual DEX only needs a sufficiently funded AMM liquidity pool to launch a market, allowing for more flexible onboarding of diverse assets.

Simplified trading experience. The absence of underlying assets means no need to handle dividends, stock splits, or other corporate actions, allowing traders to focus solely on price fluctuations.

Delta-neutral yield strategies. When spot tokens and perpetual contracts coexist, market-neutral yield strategies can be constructed. For example, when the funding rate is positive, buying spot and shorting perpetual contracts can achieve capital-efficient "cash arbitrage" (similar to Ethena's strategy).

Challenges

The unique risks of perpetual contracts should not be overlooked:

Lack of ownership and composability. Perpetual positions are typically not withdrawable, lendable, or usable as collateral for other DeFi protocols, sacrificing composability for trading efficiency.

Complexity of funding rates and "holding costs." When market sentiment is heavily skewed, longs must continuously pay fees to shorts. For stocks with low volatility, funding rates may exceed daily price fluctuations, eroding profits, making perpetual contracts more suitable for short- to medium-term trading or delta-neutral strategies.

Extreme oracle and liquidation risks. The system relies entirely on oracle prices. When traditional markets are closed, if oracles obtain anomalous prices from illiquid sources, it could lead to instant chain liquidations.

Ongoing regulatory pressure. As securities derivatives, perpetual DEX typically register in offshore jurisdictions and evade U.S. and European regulations through geographic blocking, but they always face existential risks from sudden policy changes.

4. The Future of Stock Tokenization

Robinhood's entry has pushed this field from a niche experiment to the mainstream track. In the coming year, we will see:

A liquidity battle. Various platforms will compete for market makers and trading flow through incentives such as yield and points airdrops to solve the "chicken and egg" problem.

Exploration of regulatory pathways. More issuers will emulate the Liechtenstein model, and regulatory frameworks in places like Hong Kong may also become templates. Tentative collaborations between traditional financial institutions and compliant crypto companies will emerge.

Composability practices, with mainstream lending protocols potentially accepting "blue-chip" tokenized stocks as collateral, and automated yield vaults and basis trading strategies will rise.

Maturation of the perpetual market. Listed assets will expand from U.S. tech stocks to Hong Kong stocks and commodities, with upgrades to oracle and risk management systems becoming technical priorities.

If the vision of crypto is to put everything on-chain, stocks will undoubtedly be an important piece of the puzzle, and this experiment is worth looking forward to.