Dialogue with Kraken's tokenized stock head: Ensure that any user can obtain tokenized stocks with one click

Editor: Wu Says Blockchain

In this episode of Wu Says podcast, Valentin Gui, head of xStocks at Kraken, shared his views on stock tokenization. xStocks is a collaborative project involving Kraken, Backed, and Solana, aimed at providing synthetic exposure backed by real stocks to global users, especially those who cannot directly access the stock market.

Valentin discussed how xStocks differentiates itself from competitors like Robinhood, how it addresses global regulatory challenges, and revealed the platform's future expansion plans. He emphasized the open characteristics of xStocks—permissionless, supporting multi-chain deployment, and promoting collaboration in an alliance format—and expressed his long-term vision for it to become part of the Web3 financial infrastructure.

Clarifying the Background of xStocks and the Token Collateral Mechanism

Ehan: Can you talk about the origins of the xStocks project? There are questions in the community regarding the previous project DAOStack and its failed ICO. Can you explain what happened at that time and how it affects xStocks?

Valentin: Of course. First, I want to clarify that I am the general manager of xStocks under Kraken. We are working with Backed, which is the issuer of these tokens. I guess the issue you mentioned refers to a company or project that our partner was previously involved in. However, the core reason that attracted us to join xStocks is its robust overall architecture and clear future development direction. The initial collaboration was established among Kraken, Backed, and Solana, and now we are expanding this collaborative mechanism to more centralized exchanges and on-chain ecosystems.

One aspect we particularly value is that its token issuance model is very rigorous, minimizing common risks. Unlike many tokens, each xStocks token is fully collateralized 1:1 by real stocks, and tokens can only be issued after the underlying stocks are genuinely purchased and held by a custodian. We strongly endorse this "assets first, tokens later" approach because it ensures that every token has real value backing it.

Why Choose Stock Tokenization: Achieving Global Financial Inclusion with Synthetic Assets

Ehan: So why did xStocks choose the direction of stock tokenization? What problems does it mainly solve?

Valentin: That's a great question. Essentially, we want to solve the issue of allowing users and investors to access the stock market on-chain, especially those who originally had no channels to buy stocks. One of Kraken's missions is to promote global financial inclusion, and we are particularly focused on how to enable more people to access traditional assets like the U.S. stock market through tokenization.

Of course, users are not actually buying these stocks; they do not hold the rights to the stocks themselves, but rather gain a "synthetic exposure" tied to the performance of these stocks through tokens. This means they can benefit from stock price fluctuations without holding the actual stocks.

Kraken's Layout for RWA and Collaboration Promotes the Launch of xStocks

Ehan: xStocks has received strong support from Kraken. How was this collaboration established? How has it achieved widespread circulation on centralized exchanges and DeFi platforms?

Valentin: That's a good question. I can elaborate on Kraken's part since I am a key participant in this collaboration. Kraken has always wanted to participate more in the RWA (Real World Assets) space, bringing these traditional assets on-chain. When evaluating suitable RWAs for tokenization, we focused on stock assets—because stocks are widely recognized globally and users are familiar with them. However, many people cannot directly buy stocks, so we thought about whether we could allow users to gain stock performance benefits through a "synthetic token" without actually owning the stocks themselves.

Initially, we considered whether to issue tokens directly ourselves, but after discussions with several companies, we decided to collaborate with Backed because they already have a complete set of mature processes. Solana also joined us at this stage, and the three of us built a complete collaborative framework.

xStocks has been quickly accepted by other centralized and decentralized exchanges largely due to our very open collaborative mechanism. Kraken was the first centralized exchange to go live, but other platforms can also directly approach Backed to sign agreements and independently issue xStocks tokens. Kraken does not have any "privileges"; we are just the first participant. This open and alliance-based collaboration model is key to xStocks' rapid expansion.

Key Differences from Robinhood: Openness and Multi-Chain Circulation

Ehan: Some people might compare xStocks with existing platforms like Robinhood. What are your differences?

Valentin: That's a great question. Robinhood launched its own stock tokenization product in early July. But the core difference between the two is that xStocks is permissionless, while Robinhood's product is closed.

For example, on Robinhood, while you can purchase stock tokens, these tokens can only be used within the Robinhood platform, cannot be transferred out, and cannot circulate on other chains.

In contrast, xStocks is completely open. You can manage these tokens yourself and transfer them to any DEX or dApp for use, supported by the entire Web3 ecosystem. Moreover, xStocks is multi-chain deployed—initially launched on Solana, with BNB Chain and Injective coming soon, and we are also in discussions with several other chains. This means users can freely use these tokens across chains without platform restrictions.

Not Afraid of Competition: Welcoming Binance and Coinbase to Join

Ehan: Are you worried about leading platforms like Binance or Coinbase launching similar products?

Valentin: We are actually not worried about competition. To be frank, we hope they will join us in doing this. The reason we designed this collaborative mechanism is to make it easy for participants like Binance and Coinbase to join; they just need to negotiate a suitable plan with our issuing partner, Backed.

From the beginning, we have built xStocks as an open and inclusive alliance. If they choose not to join and prefer to do it themselves, that's fine; we have no objections. But our doors are always open—any institution willing to participate is welcome. We hope to build this ecosystem into an industry standard that benefits more people.

Addressing Liquidity Challenges in Centralized and Decentralized Exchanges

Ehan: Some feedback indicates that xStocks lacks sufficient liquidity on centralized exchanges. How is this issue being addressed?

Valentin: That's a good question. At Kraken, we have placed great importance on liquidity issues from the very beginning and have made many preparations. Kraken currently does not face serious liquidity problems, mainly due to our strategies in inventory building and asset deployment.

Of course, I have heard that some other DEXs or centralized exchanges have indeed faced challenges in this area. But we believe that as the entire ecosystem matures, this issue will gradually improve. Backed is also taking some measures to enhance liquidity, although you would need to ask them for specific details. However, to my knowledge, the Backed team and other participating exchanges are actively promoting this matter.

U.S. Regulatory Challenges: How xStocks Differs from the Failed Attempts of FTX and Binance

Ehan: Let's talk about the regulatory environment in the U.S. What are your views on the current opportunities and challenges in U.S. regulation? For example, do the election of Trump and the SEC's policies affect the advancement of xStocks? Previous attempts at tokenized stocks by FTX and Binance have failed. What makes xStocks different?

Valentin: That's a very good question. Indeed, the current political and regulatory environment in the U.S., especially the policy direction under Trump's administration and the SEC's stance, has had a significant impact on our strategy.

Currently, xStocks is deliberately not launching in the U.S., which is a joint decision with our partners. Because there is a lack of a clear regulatory framework in the U.S., we have not obtained the relevant compliance permissions. Therefore, Kraken will not provide this service to U.S. users, and the entire product is not available in the U.S.

Of course, we are actively communicating with regulatory agencies, hoping to find a feasible compliance path in the future. But until then, xStocks will not be open in the U.S. market. We do not want to follow the old paths that failed due to regulatory issues.

Compliance with Securities Regulations: xStocks Will Launch in Europe Through a Cyprus Entity

Ehan: Hester Peirce mentioned today that any tokenized securities must comply with existing securities laws. Will this have any impact on xStocks?

Valentin: It certainly will. Kraken takes compliance issues very seriously, regardless of when or how we launch. For example, in Europe, we will launch xStocks in the coming days, but through an entity established in Cyprus.

This entity has already been approved by the Cyprus Securities and Exchange Commission (CySEC) and is authorized as a licensed financial intermediary under MiFID II (EU Markets in Financial Instruments Directive). Therefore, xStocks will be offered in Europe as a compliant MiFID II product.

This is also why we have not launched in the U.S. yet—there is no clear regulatory framework in the U.S., nor do we have the approvals we need. We will consider launching xStocks in the U.S. only after obtaining all necessary compliance permissions.

Main Regulatory Challenge: How to Define the Legal Nature of xStocks

Ehan: What is currently the biggest regulatory obstacle facing xStocks?

Valentin: The biggest issue is getting regulatory agencies—especially in Europe and the U.S.—to truly understand what xStocks is and how it should be classified.

Currently, there are three possible classifications: one is digital asset, one is debt instrument, and the other is security. Regulatory agencies in different countries may have different interpretations and judgments.

Therefore, in every communication with regulatory agencies, we must engage in additional discussions around this classification issue. At the same time, they will raise many questions about the operational mechanisms of xStocks and how to protect investors' rights. Kraken takes this very seriously, and it is a core part of our ongoing dialogue with regulatory agencies.

Exploring Opportunities for Pre-IPO Equity Tokenization

Ehan: Pre-IPO equity is a very exciting area. Does xStocks have plans to enter this space?

Valentin: This is indeed a direction we are very interested in and are actively discussing. I can't reveal too many details yet, but we are closely monitoring relevant opportunities and hope to have more content to share in the coming weeks.

xStocks' 2025 Roadmap: Global Expansion, Enhanced Token Utility, and Expanded Product Offering

Ehan: Can you talk more about the development plans for xStocks in the future?

Valentin: Of course. One of our key goals this year is to continue expanding market coverage. Currently, xStocks has already launched in Asia, Africa, and Latin America, and we will soon launch in Europe. We also hope to enter the U.S. market by the end of this year. This is something we are prioritizing right now.

At the same time, we are also working to enhance the utility of these tokens, such as supporting leveraged trading and allowing users to use these tokens as collateral for lending and other financial activities. These features will greatly enrich the user experience and make the assets more dynamic.

Additionally, we plan to significantly expand the coverage of tokens. Currently, we have launched about 61 tokens and hope to increase that number to several hundred by the end of the year.

The Potential of Perpetual Contracts and Derivatives in Tokenized Stocks

Ehan: What do you think about launching perpetual contracts for tokenized stocks?

Valentin: This is a very noteworthy area. When we talk about derivatives, such as leveraged trading and options trading, perpetual contracts will undoubtedly play an important role in this system. This is also one of the directions we are actively exploring this year.

Growth Prospects: Global Demand for Tokenized Stocks Drives Continued Expansion

Ehan: Do you expect significant growth in this market in the future?

Valentin: Absolutely. In fact, growth is already quite rapid. The total market capitalization of global stocks is in the tens of trillions of dollars, and we have observed a strong demand from users for on-chain exposure to these assets. As we continue to work with our partner Backed to bring more stock assets on-chain and provide them to users, we expect this field to continue to grow steadily.

Platforms like Robinhood have also begun to enter this space, which itself indicates that the overall market for tokenized stocks is expanding.

Collaboration with Gate.io and Potential Partnerships with Platforms like Hyperliquid

Ehan: Has Gate.io also launched similar products? Are you collaborating with platforms like Hyperliquid?

Valentin: You mentioned Gate.io, and yes, they are now part of our alliance. They have launched xStocks, and we are very pleased to be involved in this collaboration. This is a very important part of our broader market expansion strategy.

As for Hyperliquid, I cannot comment specifically at this time. I hope to have more publicly available news in the coming weeks. We are exploring collaborations with multiple platforms in the ecosystem, some of which are still in negotiation or have not officially launched yet, so I won't name them until confirmed.

Exploring Potential Collaboration with the Trump Family Project

Ehan: Will the Trump family project participate in stock tokenization? Have you had any communication or discussions with them?

Valentin: We have indeed had some communications, and there is some work being advanced in this direction. Although there are no publicly available updates yet, we know they are interested in exploring the tokenization space.

IPO vs. Token Issuance: Possible Paths for Backed's Future Development

Ehan: Looking ahead, does xStocks prefer to issue tokens itself or follow the traditional IPO path?

Valentin: I believe xStocks—more accurately, Backed as the issuer—will likely choose the traditional IPO path. But this question is better directed to the Backed team, and I will ensure they have the opportunity to respond to this topic later.

Will Tokenized Stocks Replace Traditional Stocks?

Ehan: Do you think stock tokenization could completely replace the traditional stock market in the future?

Valentin: I don't think it will completely replace the traditional stock market. Traditional stocks still have many important use cases—at least from Kraken's perspective. The reason we are excited about xStocks and tokenized stocks is that they can complement traditional stocks, providing investors with a more complete and richer product mix and usage options, which is what makes this space truly exciting.

Will tokenized stocks completely replace traditional stocks? Maybe, but a more likely scenario is that the two will merge, ultimately forming a new form that combines the advantages of both models.

Expanding Markets Beyond the U.S.: Exploring Tokenization of Hong Kong and Chinese Stocks

Ehan: Is there a possibility of launching products outside of U.S. stocks in the future, such as Hong Kong or Chinese stocks?

Valentin: Absolutely. We have already discussed this topic with the Backed team. As long as they can obtain the relevant underlying stocks in a compliant and transparent manner, there are no technical barriers preventing us from launching stocks from Hong Kong, China, or other markets.

Building a Cross-Chain Ecosystem: Enhancing the Utility of Tokenized Stocks

Ehan: Is there anything else you would like to share with our audience?

Valentin: Certainly. What excites us the most right now is the future potential of xStocks. As I mentioned earlier, Kraken is a partner in this project, and we are actively supporting Backed, Solana, and other upcoming blockchain networks. At the same time, we are promoting more centralized exchanges to join the collaboration, hoping that xStocks can become one of the industry standards in the field of tokenized stocks.

Once this standard is established, we can provide investors and users with the best liquidity and a seamless experience across chains and exchanges. This is precisely why we adopted an alliance and open collaboration model from the beginning.

More tokenized stocks will be launched in the future, and we will continue to explore new use cases to enhance the scenarios for using these tokens. As the application scenarios expand, demand will grow accordingly.

Key to Mass Adoption of Tokenized Stocks: Accessibility

Ehan: Looking ahead to the next two to three years, what do you think will be the biggest driving force for the mass adoption of tokenized stocks?

Valentin: I believe the key is "accessibility"—ensuring that any user can easily obtain tokenized stocks with one click. One exciting aspect of tokenized stocks is that people already have a basic understanding of "stocks," even if they are not deep users of the crypto space. When you tell them that this is actually a tokenized representation of a U.S. stock that can provide synthetic returns linked to stock performance, they can quickly understand.

We believe that lowering the barriers to access and enhancing the availability of tokenized stocks will bring more users into the crypto world, thereby expanding the entire market. Therefore, from promoting the adoption of tokenized stocks to facilitating the growth of the entire crypto industry, "accessibility" will be the core driving force.

Long-Term Vision: xStocks Will Become the Underlying Infrastructure of Web3 Finance

Ehan: What is your long-term vision for xStocks? Is it more like an infrastructure for the entire Web3 financial system, or a product centered around retail users?

Valentin: We do position it as the infrastructure for the financial services system. At Kraken, when we plan our future roadmap, we do not strictly differentiate between traditional stocks and tokenized stocks—we will offer both. Our focus is on how to combine the two to bring new and valuable experiences to end users.

In many cases, we believe that tokenized stocks will gradually become the default way for users to gain exposure to U.S. or international equity. This is the path xStocks is evolving towards as infrastructure— from the user's perspective, they may not even care whether they hold a tokenized version or traditional stocks.

Of course, we must also remain cautious. Currently, tokenized stocks do not grant users ownership of the underlying stocks, but from a utility perspective, tokenized stocks have many unique advantages, which is also why they are so attractive.

Market Misconceptions: Underestimating the Global Demand and Market Size for Tokenized Stocks

Ehan: What do you think is the biggest misconception among most people—even some venture capital institutions—about tokenized stocks?

Valentin: I think it is that they underestimate how big this market can be. From my observations in the U.S., many investors, especially those in the U.S. or the Western Hemisphere, do not truly realize the strong demand for gaining stock exposure globally. There are a large number of users around the world eager to invest in U.S. stocks or stocks from other international markets.

Tokenized stocks provide these users with a new path to gain returns linked to relevant performance in the form of synthetic assets. This potential is currently overlooked by many. In fact, the market demand is much broader and deeper than they imagine.

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