Tokenized Stocks

The world of investing is undergoing a profound transformation. This week, the buzz around tokenized stocks has reached a fever pitch, with major launches from Robinhood, Kraken, Bybit, and a flurry of debate about what these new digital assets mean for the future of finance. I've spent years tracking the convergence of blockchain and traditional markets. Today, I'll break down what tokenized stocks are, how they work, their legal and technical infrastructure, the pros and cons versus traditional equities, the expanding provider landscape, and what the future holds for this rapidly evolving space.

What Are Tokenized Stocks?

Tokenized stocks are blockchain-based tokens that mirror the value of real-world equities. Each token typically represents a claim on an underlying share held by a regulated custodian or special-purpose vehicle (SPV). Unlike cryptocurrencies, which derive value from network adoption or utility, tokenized stocks are directly linked to the price and economic performance of the underlying equity. These tokens can be traded 24/7, fractionally owned, and integrated into decentralized finance (DeFi) protocols. They bridge the gap between traditional finance (TradFi) and the crypto ecosystem, offering familiar investment exposure with the benefits of blockchain technology.

The Early Days: ICOs and Synthetics

The idea of trading stocks on blockchain dates back to the 2017 ICO boom, when the concept of Security Token Offerings (STOs) emerged. Early platforms tried to issue tokenized shares under securities laws, but market enthusiasm and regulatory clarity were limited.

Between 2019 and 2021, exchanges like Binance and FTX experimented with tokenized versions of popular U.S. stocks, claiming 1:1 backing by shares held in custody. These efforts were short-lived, as regulators quickly raised concerns and halted these products.

In parallel, DeFi projects such as Synthetix and Mirror Protocol created synthetic tokens that mirrored stock prices using oracles, without holding real shares. Mirror Protocol's mTSLA and mAAPL tokens, for example, tracked Tesla and Apple stock prices but were ultimately deemed unregistered securities by the SEC and collapsed with the Terra ecosystem.

The Modern Era: Asset-Backed Tokenization

Today, the dominant model is asset-backed tokenization. Regulated entities purchase real shares, hold them in custody, and issue blockchain tokens that represent ownership on a 1:1 basis. This approach is exemplified by Backed Finance's xStocks, which launched with over 60 tokenized stocks on Solana and Arbitrum. These tokens are freely transferable, trade 24/7, and are redeemable for the cash value of the underlying stock for KYC-verified holders.

The Expanding Provider Landscape

The tokenized stocks ecosystem is now a multi-provider, multi-chain environment, with each player bringing unique regulatory, technical, and DeFi integrations to the table.

Key Providers and Platforms

• Backed Finance: Swiss-based, issues xStocks—asset-backed tokens for over 60 U.S. stocks and ETFs on Solana and Arbitrum. Features include permissionless access, 1:1 backing, DeFi integration, and MiFID II compliance for European users.

• Kamino Finance: A Solana-native DeFi platform, Kamino integrates tokenized equities (including xStocks) into its lending, liquidity, and trading suite. Users can deploy xStocks as collateral, swap crypto for stocks, and access automated liquidity vaults. Kamino's integration with Pyth Network enables real-time price feeds and efficient on-chain trading.

• Dinari: U.S.-based, Dinari is the first platform to secure broker-dealer registration for tokenized stocks in the U.S., offering over 100 fully backed stocks and ETFs as dShares. Features include SEC approval, 1:1 backing, dividend support, and multi-chain availability.

• Gemini: The crypto exchange Gemini has launched tokenized stock trading in the EU, starting with MicroStrategy (MSTR) and expanding to over 20 U.S. equities, in partnership with Dinari. Features include 24/7 trading, fractional ownership, DeFi interoperability, and MiFID II compliance for EU investors.

• Ondo Finance: Ondo is a major tokenization platform with over $1.4 billion in tokenized assets. Following its acquisition of Oasis Pro (a regulated broker-dealer and ATS), Ondo is preparing to launch tokenized stocks for non-U.S. investors via its Global Markets platform.

• Kraken and Bybit: Both exchanges have listed tokenized stocks (primarily xStocks from Backed) for global users, offering 24/7 trading, instant settlement, and DeFi compatibility.

• Republic: Republic offers Mirror Tokens that provide economic exposure to private companies (e.g., SpaceX, Anthropic, Epic Games) via SPVs, rather than direct equity.

Comparative Table: Leading Tokenized Stock Providers

How Tokenized Stocks Work: Infrastructure and Mechanics

Asset-Backed vs. Synthetic Tokens

• Asset-Backed Tokens: Real shares are held in custody by a regulated entity or SPV. Blockchain tokens are issued to represent ownership. These tokens are redeemable for the underlying asset or its cash value, and their price is anchored to the real stock through arbitrage.

• Synthetic Tokens: No real shares are held. Instead, tokens are pegged to stock prices via algorithmic mechanisms and collateral. This model introduces counterparty risk and has largely fallen out of favor due to regulatory and solvency concerns.

Legal and Custodial Structure

A licensed entity such as a broker, bank, or SPV holds the actual securities and issues the tokens. Redemption for the underlying asset or cash value typically requires KYC/AML verification. The blockchain provides the trading and settlement layer, but the linkage to the off-chain asset relies on legal contracts and compliance procedures.

Legal Status and Investor Rights

• In the United States, tokenized stocks are considered securities and require SEC registration or exemption. Most platforms geo-block U.S. users. Coinbase is seeking SEC approval to offer tokenized equities, which could be a major milestone if granted.

• In Europe, the EU's MiCA regulation and existing securities laws provide a pathway for regulated firms to offer tokenized securities to non-U.S. investors. Robinhood leverages a Lithuanian brokerage license for its EU launch.

• Switzerland and Liechtenstein have explicit legal frameworks for tokenized securities, making them hubs for compliant offerings.

Token holders benefit from price movements and, in many cases, receive dividends on-chain. Voting rights are typically excluded to simplify compliance, so token holders do not participate in shareholder governance. Asset-backed tokens can be redeemed for the underlying asset or its cash value, subject to KYC and platform terms. Investors rely on the issuer's credibility and regulatory oversight, and protections like SIPC insurance may not apply.

Pros and Cons: Tokenized vs. Traditional Stocks

Advantages include 24/7 trading and instant settlement, global accessibility and financial inclusion, fractional ownership and low minimums, self-custody and peer-to-peer transfers, and integration with DeFi for new financial flexibility.

Challenges include regulatory uncertainty and restrictions, liquidity and price dislocations during off-hours, counterparty and redemption risk, lack of voting rights, and potential for market fragmentation across platforms.

Case Study: Robinhood's Tokenized Stocks (SpaceX & OpenAI)

Robinhood's June 2025 launch of tokenized stocks in the EU is a watershed moment. Users can buy tokens representing over 200 U.S.-listed stocks and a handful of private companies like OpenAI and SpaceX. For public stocks, Robinhood's entity purchases and holds the shares, issuing tokens 1:1 mapped to the underlying asset. Dividends are passed through, but voting rights are not.

For private companies, Robinhood uses SPVs to provide economic exposure. These tokens do not confer actual equity but represent a claim on the value of the SPV's stake in the company. OpenAI publicly distanced itself from the offering, warning that the tokens "are not actually equity in the company" and that any transfer of OpenAI equity requires its approval. This highlights the legal and practical complexities of tokenizing private assets.

Robinhood's approach is vertically integrated: it handles brokerage, custody, tokenization, and trading within its app, with plans to allow withdrawals to external wallets as it migrates to its own blockchain.

Why Tokenize Stocks? The Value Proposition

• 24/7 Trading and Instant Settlement: Tokenized stocks can be traded any time, with near-instant settlement, reducing counterparty risk and enabling faster capital recycling.

• Global Accessibility: Tokenized stocks democratize access to global equities, especially for investors in regions with limited brokerage infrastructure or capital controls.

• Fractional Ownership: Tokens can be divided into tiny increments, allowing small investors to diversify across high-priced stocks with minimal capital.

• Self-Custody and Programmability: Investors can hold tokens in their own wallets, enabling peer-to-peer transfers and programmable ownership.

• DeFi Integration: Tokenized stocks can be used as collateral in lending protocols, provided as liquidity in AMMs, and incorporated into on-chain index funds and derivatives, unlocking new yield and risk management strategies.

The Risks and Challenges

• Regulatory Uncertainty: Jurisdictions differ on how tokenized stocks are classified and regulated. U.S. investors are largely excluded, and legal frameworks are still evolving.

• Liquidity and Price Gaps: Off-hour trading can lead to price dislocations, especially during major news events or market volatility.

• Counterparty Risk: Investors must trust the issuer to hold and manage the underlying shares properly.

• No Governance: Lack of voting rights may deter some investors, especially institutions seeking influence over corporate actions.

• Fragmentation: Multiple tokens for the same stock across different chains and platforms could dilute liquidity and create confusion.

The Future of Tokenized Stocks: My Perspective

Tokenized stocks are at the forefront of a new era in capital markets. The infrastructure is maturing, regulatory clarity is improving, and demand is real - Backed xStocks, for example, handled over $7.7 million in on-chain stock token volume in a single day this month, with more than half in the S&P 500 index token.

What Lies Ahead?

• Steady Growth: Adoption will likely be gradual as technical and regulatory hurdles are addressed and each new issuer, regulatory approval, and liquidity milestone builds momentum.

• Mainstream Integration: Major players like BlackRock, JPMorgan, and NASDAQ are investing in blockchain infrastructure, signaling inevitable integration with traditional finance.

• Enhanced DeFi Capital Markets: Expect a richer set of DeFi primitives—on-chain index funds, perpetual swaps, and options on stock tokens, all available 24/7.

• Broader Asset Tokenization: Stocks are just the beginning. Bonds, real estate, and other assets will follow, creating a unified, interoperable on-chain marketplace.

• Institutional Adoption: As liquidity deepens and regulatory clarity improves, institutions will participate in arbitrage, market making, and operational efficiency, further legitimizing the space.

• Regulatory Evolution: New rules and standards for custody, disclosure, and trading will emerge, especially as the EU's MiCA and the U.S. SEC refine their approaches.

• Corporate Actions On-Chain: Smart contracts will automate dividends, splits, and mergers, and potentially enable native on-chain share issuance.

• Geopolitical Implications: Tokenized U.S. stocks could reinforce dollar and equity dominance globally while offering emerging markets new ways to attract capital.

Conclusion: The Synaptic Finance View

Tokenized stocks are not just a technological novelty; they are a fundamental reimagining of how equity markets operate. By combining the transparency and efficiency of blockchain with the regulatory frameworks of traditional finance, tokenized stocks are democratizing access, lowering barriers, and creating new opportunities for investors worldwide.

The events of this week - Robinhood's high-profile launch, the expansion of Backed xStocks, the rise of Kamino, Dinari, Gemini, Ondo, and the rapid integration with DeFi demonstrate that this transformation is already underway. As CEO of Synaptic Finance, I believe we are witnessing the early stages of the most significant evolution in equity markets since the advent of electronic trading.

The future is being built today, block by block. Those who understand and embrace this transformation early will be best positioned to benefit from the democratization of global equity markets. The convergence of TradFi and DeFi through tokenized stocks is not just an investment opportunity - it's a new paradigm for value creation, transfer, and access in the global economy.