Business Opportunities of Tokenized Stocks

Author: G_Gyeomm, Four Pillars

Compiled by: Block unicorn

When underlying technologies change, the business scope built on these technologies also changes. Stablecoins are the first clear example of this transformation. Major issuers like Tether and Circle currently have a total circulating stablecoin amount of about $250 billion, and Tether holds more U.S. Treasury bonds than most G20 countries.

The business scope of stablecoins has long surpassed the issuance level. It now encompasses orchestration layers (e.g., BVNK, Stripe), on-chain new banks (e.g., Ether.Fi, UR), and stablecoin payment terminals (e.g., Ingenico-WalletConnect), and these products have already been put into commercial use.

New technologies continuously give rise to new forms of economic activity, leading to new business opportunities. So, what opportunities can tokenized stocks bring?

In this article, we will outline the lifecycle of tokenized stocks, analyze the current market landscape, and highlight the emerging business opportunities.

1. Lifecycle of Tokenized Stocks

The tokenized stock market is still in its early stages, and most discussions are still focused on tokenization models. However, issuance is just the starting point. In the following sections, we will detail the complete lifecycle of tokenized stocks, from issuance to listing on trading venues, price discovery and liquidity formation, use as collateral, and finally redemption.

To better analyze, we focused on three representative cases: Securitize, Backed Finance, and Robinhood. We compared the differences at each stage of these models and pointed out the key considerations for each step.

1.1 Issuance

• Securitize: Issues stock tokens directly through a transfer agent registered with the U.S. Securities and Exchange Commission (SEC). Investors can only participate through approved wallets, and these tokens enjoy the same ownership, voting rights, and dividend rights as traditional stocks.

• Backed Finance: Holds underlying stocks through a special purpose vehicle (SPV) and issues bearer debt securities backed by these stocks, which are packaged in token form.

• Robinhood: When investors purchase stock tokens through the Robinhood app, Robinhood EU acquires the stocks through U.S. brokers and issues stock tokens as derivative contracts rather than underlying stocks.

The first step in the lifecycle is the tokenization of the underlying stocks. The key distinction lies in the legal ownership structure implied by each tokenization model. This structure determines which platforms the tokens can trade on and who can participate. The detailed mechanisms are omitted here, as each model has been introduced earlier.

1.2 Listing on Trading Platforms

• Securitize: Supports secondary trading of tokenized stocks on its own ATS (Alternative Trading System). The ATS collaborates with OTC market makers, which operate as broker-dealers registered with the SEC and FINRA, facilitating trades through order books and request-for-quote (RFQ) mechanisms.

• Backed Finance: xStocks can be freely traded around the clock on centralized exchanges (CEX) like Bybit and Kraken, as well as decentralized exchanges (DEX) like Jupiter and Raydium.

• Robinhood: Robinhood's tokenized stock tokens can only be traded within the Robinhood app, currently operating 24 hours a day, five days a week.

Access to trading platforms varies by tokenization model, and execution mechanisms differ accordingly. On Securitize's ATS, order matching and settlement occur off-chain and follow existing securities market rules. In contrast, xStocks are not subject to any trading platform restrictions. They trade through order books on centralized exchanges (CEX) and through non-custodial on-chain automated market makers (AMM) on decentralized exchanges (DEX). Robinhood acts as both the counterparty and liquidity provider, handling user order flow internally on its platform.

1.3 Price Discovery

• Securitize: According to Reg NMS, Securitize's ATS must provide fair execution prices. During order matching, it references prices from traditional stock markets and verifies that the execution price falls within an acceptable range.

• Backed Finance: xStocks integrate oracles to obtain reference prices for the underlying stocks on-chain. Stock tokens based on Solana primarily rely on the Pyth Network, while EVM deployments combine multiple data sources, including Chainlink, to construct reference prices.

• Robinhood: The price of tokenized stocks is determined by Robinhood's internal ledger system and directly references the regular trading session prices of the U.S. stock market (e.g., NASDAQ and NYSE).

The price discovery mechanism provides a fair reference price, allowing investors to trade efficiently. Compared to traditional stocks or crypto-native assets, the price discovery mechanism for stock tokens has more friction. Crypto assets are inherently traded on-chain around the clock, while the underlying market for stocks operates off-chain.

The most challenging factor is regular trading hours. During market hours, arbitrage tightly links the prices of tokenized stocks to the prices of their underlying stocks. Premiums and discounts are quickly corrected through real-time price information, and token prices ultimately converge towards the spot stock prices.

However, the U.S. stock market is closed for 16 hours on weekdays and completely closed on weekends. During these periods, there is no dominant reference price, and the price correlation of tokenized stocks, which trade around the clock, may weaken. Off-hours trading also brings risks such as higher price gaps, outdated data, and execution instability.

Therefore, tokenized stocks need to implement safeguards to manage off-chain and non-trading hour risks. These functions include market state tracking, data freshness detection, circuit breaker mechanisms, and event-aware logic. To this end, oracle providers have begun integrating contextual metadata with raw prices into their data sources.

Traditional ATS and market data providers have also entered the stock token market by providing after-hours price data sources to oracle networks. Additionally, if the planned 24/5 trading by the New York Stock Exchange (NYSE) is implemented, the price gap risk during most trading hours may be reduced, except on weekends.

1.4 Liquidity Management

• Securitize: Ensures liquidity by establishing partnerships with OTC market makers on its ATS.

• Backed Finance: xStocks connect to order books of centralized exchanges (CEX) supported by market makers while also obtaining on-chain liquidity from external liquidity providers (LP) through decentralized exchange (DEX) pools.

• Robinhood: The liquidity of Robinhood's tokenized stocks is limited to the platform itself and relies on Robinhood's internal order book and partner market makers.

Liquidity management ensures that tokenized stocks can smoothly absorb market trading activity. In addition to supporting large trades, sufficient liquidity depth is crucial for tokenized stocks as collateral, preventing unnecessary liquidations caused by price shocks and allowing borrowers to close positions smoothly when needed.

In practice, trading of tokenized stocks often occurs in conditions of insufficient liquidity. This leads to frequent price fluctuations and excessive slippage for traders. For example, redeeming $1 million worth of TSLAx on the Jupiter exchange incurs about 5% slippage, while NVDAx can have slippage as high as 80%, making it nearly untradeable. Compared to traditional exchanges like CME, where price shocks are typically measured in single-digit basis points, these levels of slippage are unacceptable.

Liquidity constraints primarily stem from the challenges faced by market makers. In public markets, market makers provide liquidity by managing inventory under risk constraints and effectively allocating capital. However, the tokenized stock market has unfavorable conditions in several aspects.

• High inventory costs: Market makers must obtain tokenized stocks from issuers in advance to provide liquidity, incurring issuance and redemption fees, as well as operational friction associated with brokers and custodians.

• Low inventory turnover: Tokenized stocks are not always redeemable immediately, especially outside of small trades, where redemption limits are often set daily or weekly. This hinders rapid inventory reduction, forcing market makers to gradually close positions, reducing capital efficiency and spread capture ability.

• Limited hedging tools: Hedging tools are unavailable during non-trading hours. Market makers trading on weekends bear direct price risk and respond by providing larger spreads and smaller trading volumes. Investors who buy at a premium over the weekend face immediate loss risks when prices revert to spot levels at market open.

For these reasons, protocols, exchanges, and investors are forced to adopt conservative operational strategies in the tokenized stock market. These strategies include lowering loan-to-value ratios (LTV), expanding safety margins, and completely avoiding non-trading hour trading. In the long run, the tokenized stock market may seek to reduce reliance on traditional stock trading venues and ultimately evolve into an underlying market. However, achieving this goal requires significant changes to regulatory frameworks and financial infrastructure, which remains a long-term challenge.

1.5 Collateralization (Using as Collateral)

• Securitize: Through features such as KYC enforcement, transfer restrictions, and address whitelisting in the DS protocol, Securitize can achieve collateralization within a permissioned ecosystem composed of pre-approved participants and applications.

• Backed Finance: xStocks have been used as collateral for permissionless DeFi protocols like Kamino and Loopscale.

• Robinhood: Robinhood's tokenized stocks are limited to trading within the platform and do not support any collateral services.

Tokenized bonds such as BUIDL and USTB have established their status as DeFi collateral assets, generating stable government bond yields while also providing additional loan income. Tokenized stocks further expand this model, supporting 24/7 stock collateral lending, allowing users to obtain stablecoins without selling their held stocks.

At the same time, the collateralization of tokenized stocks differs significantly from crypto-native assets. The interactions between regulatory compliance, price discovery, and non-trading hour risks are more complex. Similar to trading, collateralization is divided into two categories based on tokenization models: one is permissionless DeFi, and the other is compliance-oriented DeFi using tools like ERC-3643. We will explore specific cases in more detail in subsequent sections.

1.6 Redemption

• Securitize: Allows tokens to be transferred to traditional brokerage accounts or redeemed through DTCC, at which point the tokens will be destroyed, and equivalent stocks will be delivered to the investor's existing stock account.

• Backed Finance: xStocks can be redeemed for fiat or stablecoins through the Backed Finance platform, with settlement guaranteed to be completed within T+3 business days. Small redemptions can be processed immediately using operating funds.

• Robinhood: Robinhood's tokenized stocks do not support the redemption of underlying stocks and can only exit through secondary market trading.

The final stage of the lifecycle is redemption, which is the exchange of tokenized stocks back to cash or underlying stocks. The redemption mechanism distinguishes between tokens representing derivative exposure and those directly linked to the underlying assets. It also determines whether token prices can trend towards the underlying stock prices over the long term.

2. Business Opportunities Brought by Tokenized Stocks

Analyzing the lifecycle of tokenized stocks helps us understand the new business models that may emerge. As tokenized stocks circulate as a new asset class in the market, new friction points continue to arise, along with new stakeholders that did not exist before.

The following sections will explore the key areas that constitute the tokenized stock market, focusing on blockchain, tokenization platforms, compliance infrastructure, oracles, and decentralized finance (DeFi). We will outline the main participants and their current status in each area.

2.1 Blockchain

In tokenized stocks, blockchain is the most fundamental infrastructure needed to complete ownership transfers. Previous discussions about blockchain selection primarily focused on technical considerations such as transaction throughput, block finality, and developer tools.

However, for tokenized stocks, regulatory compliance has become the primary consideration. Therefore, attention has shifted to how to leverage blockchain to programmatically enforce regulatory requirements.

If measured by the issuance volume of tokenized stocks, Ethereum still dominates, followed by Solana, Algorand, and Stellar.

Ethereum is widely regarded as the blockchain with the lowest risk of downtime and has established a good institutional reputation through multiple RWA issuances, including BlackRock's BUIDL.

In contrast, Solana has built a tokenized stock ecosystem centered around more flexible, trading-oriented products. Blockchains with active retail trading attract tokenized stocks issued by Backed Finance and Ondo, prioritizing liquidity and trading flexibility.

Algorand and Stellar have relatively low usage rates in other segments, but they stand out in the tokenized stock space due to their regulatory compliance capabilities. Both blockchains natively support features such as transfer restrictions, permission controls, and asset recovery at the protocol level, without the need for additional middleware.

In fact, WisdomTree has issued five mutual funds totaling $20 million on Algorand, including stock portfolios. Securitize also chose Algorand as the issuance chain for its approximately $150 million EXOD tokenized stock.

• Stellar

Stellar allows for the separation of roles between issuers, distributors, and holders at the chain level. Once assets are issued on Stellar, users must establish a trust relationship with the issuer to hold the asset, and the issuer can approve or deny that trust relationship. By combining this structure with features such as transfer restrictions, authorization requirements, revocability, and recovery mechanisms, Stellar can achieve the control interface required for tokenized stocks.

• Algorand

Algorand embeds compliance features directly into the tokens themselves. Its token standard ASA (Algorand Standard Assets) allows issuers to programmatically define manager addresses, freeze addresses, recovery addresses, and reserve addresses when creating assets. This enables issuers to approve or freeze transfers from specific accounts and reclaim assets based on regulatory or legal requirements.

At the contract level, Algorand's state smart contracts apply rules such as conditional transfers, holder eligibility checks, and jurisdiction-based policies. These mechanisms collectively enforce the KYC status, accredited investor access, and trading restrictions required for tokenized stocks.

2.2 Tokenization Platforms

While the total issuance of tokenized government bonds is about $9.3 billion, the cumulative issuance of tokenized stocks is still around $900 million, with a difference of more than ten times.

From the perspective of traditional market size, the situation is quite the opposite. The market capitalization of the U.S. stock market is estimated to be about $68 trillion, while the circulating market value of U.S. government bonds is close to $30 trillion. Globally, the stock market is roughly twice the size of the government bond market. From this perspective, the potential market for tokenized stocks is much larger than that for tokenized government bonds.

In this context, tokenization platforms become important participants worth paying attention to. Market share can be estimated by cumulative issuance, but the market is still in its early stages, making precise comparisons difficult. Securitize has so far issued only one tokenized stock—Exodus Movement Inc. (EXOD)—while Backed Finance and Ondo have integrated with exchanges and DeFi for less than six months.

Looking ahead, market share is unlikely to be determined solely by issuance volume. Each platform adopts different tokenization models, with varying legal ownership structures and compliance requirements. Therefore, the target investor demographics and potential market differ significantly.

• Backed Finance

Backed Finance's xStocks have no restrictions in trading venues. Backed does not directly collaborate with issuers for stock tokenization but instead purchases stocks from the public market and issues tokenized stocks based on these underlying assets.

This structure allows Backed Finance to flexibly supply high-demand stocks to the secondary market. In practice, the issuance of xStocks is concentrated on popular stocks like TSLAx, CRCLx, and NVDAx.

Additionally, an analysis of trading data for Backed Finance and Ondo from July to October 2025 shows that 78% of the trading volume was below $100. This indicates that the indirect tokenization model effectively meets retail demand for micro-stock trading.

• Securitize

Direct tokenization models like Securitize provide an end-to-end framework for issuance, trading, and redemption under U.S. securities law. This fully retains legal ownership but reduces flexibility compared to indirect models. In indirect models, any publicly traded stock can be tokenized and freely traded after acquiring shares.

Even so, regulatory coordination may become increasingly important. Recent discussions surrounding the Clarity Act reflect growing efforts to clearly classify digital assets as securities, commodities, or other categories and define applicable regulatory regimes.

If the bill passes, tokenized stocks will almost certainly be classified as securities based on the nature of their underlying assets. This would subject the issuance of tokenized stocks to stricter scrutiny under existing securities laws.

In this context, regulatory compliance is unlikely to remain optional. For licensed issuers and investors who prefer stable dividends and long-term holdings, compliant tokenization platforms are likely to become the default choice.

2.3 Compliance Infrastructure

In tokenized stocks, investor qualification checks are typically conducted only at issuance or redemption, or within proprietary ATS environments. Once tokenized stocks are traded on-chain or used as collateral, they enter an environment of wallet-based, bearer-style transfers.

Therefore, controlling whether participants are accredited investors and whether trading activities occur within permitted jurisdictions becomes a core challenge. A series of compliance infrastructures have emerged to meet this demand.

• Chainlink Automated Compliance Engine (ACE)

Chainlink's ACE aims to enable tokenized assets to circulate on-chain while meeting regulatory requirements. Its goal is to standardize investor qualification verification, jurisdictional restrictions, and anti-money laundering/know your customer (AML/KYC) requirements, and to make these verification results interoperable across different chains and applications.

One of the core components of ACE, CCID (Cross-Chain Identity), is a cross-chain identity framework used to represent investor credentials. Off-chain verified information (e.g., KYC, AML, and accreditation status) is stored on-chain in the form of cryptographic proofs rather than as public data. Users can reuse credentials across multiple chains and DeFi applications without service providers needing access to personal information to meet compliance requirements.

Another component, the Cross-Chain Token Compliance Extension (CCT), is a modular layer that attaches compliance logic to token standards like ERC-20 and ERC-3643. It connects tokens to CCID, policy managers, and CCIP, allowing issuers to embed compliance logic without redesigning the token structure.

• ERC-3643: T-REX Protocol (Permissioned Token Standard)

ERC-3643 is an Ethereum-based standard designed for RWA tokenization. It extends permissioning features on top of ERC-20 to control authentication, KYC/AML status, investor qualifications, and jurisdictional access.

ERC-3643 tokens are integrated into an on-chain identity registry called ONCHAINED at issuance. This registry maps verified attributes such as KYC status and jurisdiction to wallet addresses without storing personal data. Only addresses that have undergone off-chain verification and are registered can receive or transfer ERC-3643 tokens.

All token operations, including issuance, transfer, and collateralization, query the ONCHAINED registry in real-time. Issuers can flexibly define various policies, such as holding limits, transfer restrictions, country/region restrictions, and lock-up periods.

• Securitize DS Protocol

Securitize's DS protocol is its proprietary compliance infrastructure that has been used to support the circulation of BlackRock's BUIDL token. Similar to Chainlink ACE and ERC-3643, it enables ERC-20 tokens to enforce compliance checks at the token level, but only for securities issued by Securitize.

The DS protocol verifies investor qualifications, transfer limits, and regulatory compliance before allowing any token transfers. It also supports vesting conditions and mandatory recovery, which are essential functions for securities.

Its registry manages a list of investors qualified to hold DS tokens and stores limited regulatory attributes such as nationality and accreditation status without recording personal identity information. This approach protects privacy while ensuring compliance.

2.4 Oracles and Interoperability

In 2023, Nasdaq generated over $600 million in revenue in the U.S. market data sector, while the parent company of the New York Stock Exchange, Intercontinental Exchange (ICE), earned $1.4 billion from market data and connectivity services in the same year. Market data has long been a core business of traditional stock markets.

In the cryptocurrency space, oracle providers initially focused on relaying off-chain exchange prices to on-chain. With the rise of RWA, their scope of business has expanded to provide real-time net asset value updates for government bond funds and spot prices for precious metals.

As the scale of tokenized stocks expands, oracles are further evolving into data providers, offering not only prices but also information about trading environments, such as trading times, liquidity conditions, and non-trading hour statuses.

• Chainlink

Source: Chainlink

Chainlink's data stream aggregates prices from at least three traditional financial data providers. Off-chain prices from integrated data and providers like Bloomberg are verified and securely relayed on-chain.

In addition to prices, Chainlink also provides contextual metadata required for tokenized stock trading, including logic that allows smart contracts to detect whether the market is in an open, closed, or low-confidence state.

• Pyth Network

Pyth Network obtains first-party market data directly from financial institutions and exchanges, minimizing latency by avoiding intermediaries. Banks, exchanges, and financial institutions, including Revolut, AMINA Bank, Cboe Global Markets, and LMAX, provide high-fidelity data directly to Pyth.

Pyth has also integrated U.S. overnight stock trading data through a partnership with the SEC-registered overnight exchange Blue Ocean ATS. This makes the reference prices for tokenized stocks more reliable outside of regular trading hours.

2.5 Exchanges

Exchanges are the primary venues for trading tokenized stocks. If tokenization platforms serve as the primary market responsible for structuring and issuing stocks, exchanges like Bybit and Kraken operate as secondary markets, similar to the New York Stock Exchange (NYSE) or NASDAQ.

Currently, most tokenized stock trading occurs on centralized exchanges (CEX) outside of regulated ATS environments. For exchanges, tokenized stocks are both a response to the potential demand from crypto-native investors and a potential growth point. For tokenization platforms, exchanges provide distribution channels for KYC-verified users and offer deep order books supported by market makers.

In this context, exchanges like Bybit, Kraken, and Gemini have begun supporting tokenized stock trading. In December 2025, Kraken acquired Backed Finance.

• Bybit xStocks

Bybit supports 24/7 spot trading of ten xStocks assets, including COINx, NVDAx, and AAPLx. The platform only provides secondary market trading, with redemptions handled by Backed Finance, based on net asset value (NAV) for users who have completed KYC/AML verification.

So far, the cumulative trading volume of xStocks on Bybit has reached approximately $550 million, with stable activity during weekend non-trading hours.

2.6 DeFi

On-chain lending markets based on RWA are rapidly growing. One driving factor is the declining yield competitiveness of crypto-native assets. As yields on crypto assets decrease, borrowing demand and liquidity provider (LP) yields also decline.

With the annual percentage yield (APY) for the cryptocurrency market around 5% and U.S. government bond yields nearing 4%, the incentive to participate in crypto lending rather than government-backed yields has weakened. In this context, lending markets focused on RWA have gained momentum. Aave Horizon launched in August 2025, achieving $600 million in deposits and $200 million in loans within just six months.

Tokenized stocks are becoming the next category of RWA collateral after government bonds. Besides the clearing risks during non-trading hours, tokenized stocks possess relatively stable volatility and considerable upside potential, making them an attractive collateral asset.

• Kamino: Independent Pool Lending

Kamino is a Solana-based lending protocol operating a pool-based market. In July 2025, Kamino launched a dedicated xStocks lending pool, allowing users to borrow stablecoins using stock tokens like SPYx, AAPLx, and TSLAx as collateral.

Each asset operates in a separate pool with its own risk parameters and liquidity. Losses in one pool do not spread to others. The loan-to-value (LTV) cap for xStocks is below 50%, while the LTV for Ethereum collateral is typically 70-80%.

• Loopscale: Order Book-Based Lending

Source: Loopscale

Loopscale is a Solana-based lending protocol that provides fixed-rate, fixed-term loans through an order book model.

1. Loan Execution: Borrowers submit loan orders specifying loan size, term, interest rate, and collateral, or match existing orders. After execution, funds are borrowed at a fixed rate, and xStocks collateral is locked in a custodial account.

2. Maturity Repayment: On the maturity date, borrowers repay the principal and interest and withdraw collateral. The terms are determined at execution, making the repayment amount predictable.

3. Liquidation: Real-time price oracles monitor the value of collateral. If the loan-to-value (LTV) exceeds the liquidation threshold, third parties can liquidate positions in exchange for collateral and liquidation incentives.

Order book lending provides advantages for tokenized stocks. Risks can be directly priced through negotiated LTV and interest rates. Fixed terms reduce uncertainty during non-trading hours. Since only one lender and borrower are needed to match, the market can form even under extremely low initial liquidity.

Tokenized stock lending is still in its early stages. On the Loopscale platform, xStocks-backed revolving positions can currently only be closed during U.S. market trading hours, a design aimed at reducing oracle risks and price gap risks during non-trading hours.

2.7 Others

• Pre-IPO Tokenization

Pre-IPO tokenization refers to the issuance of tokens linked to shares of private companies. Robinhood has gone beyond publicly traded stocks, launching tokens linked to private companies like OpenAI and SpaceX, providing global investors with 24/7 access to assets previously limited to private markets.

These tokens do not grant investors legal ownership of the underlying stocks and are not redeemable. In fact, most Pre-IPO tokenized stocks rely on indirect tokenization, where stocks are held by special purpose vehicles (SPV) that issue corresponding tokens.

OpenAI has explicitly stated that it "has not participated in or approved any stock transfers related to Robinhood's tokenized issuance," highlighting the unresolved ownership and authorization issues that still exist under this model.

• On-Chain IPO: Superstate DIP (Direct Issuance Plan)

Superstate's DIP is a compliance platform that allows publicly traded companies registered with the SEC to issue new shares directly on-chain.

Companies set issuance terms based on real-time market prices, and investors purchase stocks directly from the issuer. Secondary market trading is limited to whitelisted wallets.

Superstate's on-chain transfer agent system, Opening Bell, updates the shareholder register at issuance. The issued tokens are considered formal stocks with CUSIP identifiers and enjoy the same economic rights and voting rights as common stocks.

Unlike traditional stock issuances or ATM programs, on-chain IPOs reduce issuance costs by eliminating underwriters and intermediaries. They also provide global investors with 24/7 access, making them a potential new channel for capital formation.

3. Summary of Key Points

Although fiat currencies, bonds, and stocks all fall under the broad category of tokenization, there are fundamental differences among them. Fiat currencies and bonds are use-driven assets centered around payments, collateral, and yields. In contrast, stocks are primarily used for holding and trading. Therefore, stablecoins and tokenized bonds support a broader value chain and business opportunities, while tokenized stocks offer a narrower scope of new activities.

Even so, the potential impact of tokenized stocks should not be underestimated. The traditional stock market structure is inefficient, and tokenization provides a powerful tool to address these inefficiencies. It also holds the promise of allowing retail investors to participate in stock financial activities that were previously difficult to access.

This transformation is not easy. Liquidity management, price discovery, and regulatory coordination remain challenges that need to be addressed. However, if these issues can be properly resolved, tokenized stocks may move beyond the experimental stage and enter a phase of sustained adoption.