Author: G_Gyeomm, Four Pillars;Compilation: Block unicorn

When the underlying technologies change, so does the scope of the business built on those technologies. Stablecoins are the first clear example of this shift. Major issuers like Tether and Circle currently have around $250 billion in stablecoins in circulation, while Tether holds more U.S. Treasuries than most G20 countries.

The commercial scope of stablecoins has long gone beyond the issuance level. It now covers orchestration layers (e.g. BVNK, Stripe), on-chain neobanks (e.g. Ether.Fi, UR), and stablecoin payment terminals (e.g. Ingenico-WalletConnect), and these products are already in commercial use.

New technologies continue to create new forms of economic activities, followed by new business opportunities. So, what exactly are the opportunities that tokenized stocks can bring?

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

1. Life cycle of tokenized stocks

The tokenized stock market is still in its early stages, and most discussions currently focus on tokenized models. However, distribution is just the starting point. In the following chapters, we will detail the complete life cycle of a tokenized stock, from issuance to listing on an exchange, price discovery and liquidity formation, use as collateral, and eventual redemption.

For better analysis, we focused on three representative cases: Securitize, Backed Finance and Robinhood. We compare the differences at each stage in these models and point out key considerations for each step.

1.1 Release

• Securitize: Direct issuance of equity tokens through a U.S. Securities and Exchange Commission (SEC) registered transfer agent. Investors can only participate through approved wallets, and the tokens have the same ownership, voting and dividend rights as traditional stocks.

• Backed Finance: Holds underlying shares through a special purpose vehicle (SPV) and issues bearer debt securities underlying those shares, which are packaged in tokens.

• Robinhood: When investors purchase stock tokens through the Robinhood app, Robinhood EU obtains the shares through a U.S. broker and issues the stock tokens as derivatives contracts rather than as underlying shares.

The first step in the life cycle is the tokenization of the underlying shares. The key difference is the legal ownership structure implied by each tokenization model. The structure determines which platforms the token can be traded on and who can participate. Detailed mechanisms are omitted here as each model has been introduced previously.

1.2 Listed on the trading platform

• Securitize: Supports secondary trading of tokenized stocks on its own ATS (Alternative Trading System). ATS partners with over-the-counter (OTC) market makers that operate as broker-dealers registered with the U.S. Securities and Exchange Commission (SEC) and the U.S. Financial Industry Regulatory Authority (FINRA) and facilitate trading through order books and request-for-quote (RFQ) mechanisms.

• Backed Finance: xStocks can be freely traded 24/7 on centralized exchanges (CEX) such as Bybit and Kraken, and decentralized exchanges (DEX) such as Jupiter and Raydium.

• Robinhood: Robinhood’s tokenized stock tokens can only be traded within the Robinhood app, which currently operates 24 hours a day, 5 days a week.

Access to trading platforms varies by tokenization model, and therefore execution mechanisms vary. On Securitize’s ATS, order matching and settlement occur off-chain and follow existing securities market rules. In contrast, xStocks is not restricted by any trading platform. They are traded through the order books of centralized exchanges (CEX) and through non-custodial on-chain automated market makers (AMM) on decentralized exchanges (DEX). Robinhood is both a counterparty and a liquidity provider, handling user order flow within its platform.

1.3 Price Discovery

• Securitize: Under Reg NMS, Securitize’s Alternative Trading System (ATS) must provide fair execution prices. When an order is matched, it references traditional stock market prices and verifies that the execution price is within an acceptable price range.

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

• Robinhood: The price of tokenized shares is determined by Robinhood's internal ledger systems and is directly referenced to regular trading session prices on U.S. stock markets such as Nasdaq and the New York Stock Exchange.

The price discovery mechanism provides a fair reference price, allowing investors to trade efficiently. There is more friction in the price discovery mechanism of equity tokens than traditional stocks or crypto-native assets. Cryptoassets are traded on-chain 24/7 by default, while the underlying market for stocks occurs off-chain.

The most challenging factor is regular trading hours. While the market is open, arbitrage keeps the price of a tokenized stock closely tied to the price of its underlying stock. Premiums and discounts are quickly corrected with real-time price information, and the token price eventually moves closer to the spot stock price.

However, U.S. stocks are 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 traded around the clock may weaken. Trading outside of trading hours also carries higher risks of price gaps, stale data and erratic execution.

Tokenized stocks therefore require safeguards to manage off-chain and non-trading hours risks. These features include market status tracking, data freshness detection, circuit breakers, and event-aware logic. To this end, oracle providers have begun integrating contextual metadata into their data sources along with raw prices.

Traditional alternative trading systems (ATS) and market data providers are also entering the equity token market by providing after-hours price data feeds to oracle networks. Additionally, if the New York Stock Exchange's (NYSE) planned 24/5 trading support is implemented, the risk of price gaps may be reduced during most trading sessions except weekends.

1.4 Liquidity Management

• Securitize: Secure liquidity through partnerships with over-the-counter (OTC) market makers on their Alternative Trading Systems (ATS).

• Backed Finance: xStocks connects to central exchange (CEX) order books powered by market makers, while also sourcing on-chain liquidity from external liquidity providers (LPs) through decentralized exchange (DEX) pools.

• Robinhood: Liquidity in 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 shares can smoothly absorb market trading activity. In addition to supporting large transactions, sufficient liquidity depth is critical for tokenizing stocks as collateral, preventing unnecessary liquidations due to price shocks and allowing borrowers to smoothly close out positions if needed.

In practice, tokenized stock trading often occurs in situations of illiquidity. This results in frequent price swings and traders facing excessive slippage. For example, exchanging $1 million worth of TSLAx on the Jupiter exchange would incur slippage of around 5%, while NVDAx’s slippage is as high as 80%, making it nearly impossible to trade. These levels of slippage are unacceptable compared to traditional exchanges like CME, where price shocks are typically measured in single-digit basis points.

Liquidity constraints stem primarily from challenges faced by market makers. In open markets, market makers provide liquidity by managing inventories within risk constraints and allocating funds efficiently. And tokenized stock markets are disadvantaged in multiple ways.

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

• Low inventory turnover: Tokenized shares are not always redeemable immediately, especially outside of small transactions, and redemption limits are often set on a daily or weekly basis. This prevents rapid inventory reduction and forces market makers to gradually unwind positions, thereby reducing capital efficiency and spread capture capabilities.

• Limited hedging tools: Hedging tools are not available during non-trading hours. Market makers who trade on weekends directly assume price risk and respond by offering wider spreads and smaller trading volumes. Investors who buy at a premium over the weekend run the risk of immediate losses when prices fall back to spot price levels at the open.

For these reasons, protocols, exchanges, and investors are forced to adopt conservative operating strategies in the tokenized stock market. These strategies include reducing loan-to-value ratios (LTV), widening the margin of safety, and avoiding off-hours trading altogether. In the long term, tokenized stock markets may seek to reduce reliance on traditional stock trading venues and eventually develop into underlying markets. However, achieving this goal requires significant changes to regulatory frameworks and financial infrastructure, which remains a long-term challenge.

1.5 Mortgage (used as collateral)

• Securitize: With features like DS Protocol’s KYC enforcement, transfer restrictions, and address whitelisting, Securitize enables staking in a permissioned ecosystem of pre-approved participants and applications.

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

• Robinhood: Robinhood tokenized stocks are only available for trading within the platform and do not support any staking services.

Tokenized bonds such as BUIDL and USTB have established themselves as DeFi collateral assets that not only generate stable Treasury yields, but also generate additional loan income. Tokenized shares extend this model even further, enabling 24/7 stock-collateralized borrowing and lending, allowing users to obtain stablecoins without having to sell their holdings.

At the same time, collateralization of tokenized stocks differs significantly from crypto-native assets. The interplay between regulatory compliance, price discovery and out-of-trading hours risk is more complex. Similar to trading, staking is also divided into two categories based on the tokenization model: permissionless DeFi and compliance-oriented DeFi using tools such as ERC-3643. We will explore specific cases in more detail in subsequent chapters.

1.6 Redemption

• Securitize: Allows tokens to be transferred to a traditional brokerage account or redeemed through DTCC, at which point the tokens will be burned and shares of equivalent value will be delivered to the investor’s existing stock account.

• Backed Finance: xStocks can redeem legal currency or stable currency through the Backed Finance platform, and settlement is guaranteed to be completed within T+3 working days. Small redemptions can be processed immediately using working capital.

• Robinhood: Robinhood tokenized stocks do not support redemption of underlying stocks and can only be exited through secondary market transactions.

The final stage of the life cycle is redemption, where the tokenized shares are exchanged back for cash or underlying shares. The redemption mechanism distinguishes between tokens that represent derivatives exposure and tokens that are directly tied to the underlying asset. It also determines whether the token price can trend toward the underlying stock price over the long term.

2. Business opportunities brought by tokenized stocks

Analyzing the life cycle of tokenized stocks can help us understand new business models that may emerge. As tokenized stocks circulate in the market as a new asset class, new friction points continue to emerge, and with them new stakeholders that did not exist before.

The following chapters explore the key areas that make up tokenized equity markets, focusing on blockchain, tokenized platforms, compliance infrastructure, oracles, and decentralized finance (DeFi). We will provide an overview of the key players in each area and their current status.

2.1 Blockchain

In tokenized stocks, blockchain is the most basic infrastructure required to complete the transfer of ownership. Previous discussions about blockchain selection have focused on technical considerations such as transaction throughput, block finality, and developer tools.

With tokenized stocks, however, regulatory compliance becomes a primary consideration. As a result, attention has turned to how blockchain can be used to programmatically enforce regulatory requirements.

If market share is measured by the number of tokenized shares issued, Ethereum still dominates, followed by Solana, Algorand, and Stellar.

Ethereum is widely considered the blockchain with the lowest risk of downtime and has established strong institutional credibility through multiple RWA issuances, including BlackRock’s BUIDL.

In contrast, Solana has built a tokenized stock ecosystem centered on more flexible, transaction-oriented products. Blockchains with active retail trading have attracted tokenized shares issued by the likes of Backed Finance and Ondo, which prioritize liquidity and trading flexibility.

Algorand and Stellar have relatively low usage in other segments, but they stand out in the tokenized equity space with their regulatory compliance capabilities. Both blockchains natively support transfer restrictions, permission control, asset recovery and other functions at the protocol level without the need for additional middleware.

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

• Stellar

Stellar allows for the separation of the roles of issuer, distributor and holder at the chain level. After an asset is issued on Stellar, users must establish a trust relationship with the issuer to hold the asset, and the issuer can approve or reject the trust relationship. By combining this structure with features such as transfer limits, authorization requirements, revocability, and clawback mechanisms, Stellar can implement the control interface needed to tokenize stocks.

• Algorand

Algorand embeds compliance functionality directly into the token itself. Its token standard ASA (Algorand Standard Asset) 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 to specific accounts and recover assets in response to 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. Together, these mechanisms enable enforcement of the KYC status, accredited investor access, and trading restrictions required for tokenized stocks.

2.2 Tokenization Platform

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

If you look at it from the perspective of traditional market size, the situation is exactly the opposite. The market capitalization of U.S. equities is estimated at about $68 trillion, while the outstanding market capitalization of U.S. Treasuries is close to $30 trillion. Globally, stock markets are roughly twice the size of government bond markets. From this perspective, the potential market for tokenized stocks is much larger than tokenized treasury bonds.

In this context, tokenization platforms have become the most important players worthy of attention. Market share can be estimated by cumulative issuance, but the market is still in its early stages and exact comparisons are not yet possible. Securitize has issued only one tokenized stock so far — Exodus Movement Inc. (EXOD) — while Backed Finance and Ondo have both been integrated with exchanges and DeFi for less than six months.

Going forward, market share is unlikely to be determined solely by circulation volume. Each platform uses a different tokenization model and has different legal ownership structures and compliance requirements. As a result, the target investor groups and addressable markets vary widely.

• Backed Finance

Backed Finance’s xStocks has no restrictions in terms of trading venues. Rather than working directly with issuers to tokenize shares, Backed purchases shares from the open market and issues tokenized shares with those shares as the underlying asset.

This structure gives Backed Finance greater flexibility in supplying high-demand stocks to the secondary market. In fact, xStocks distribution is focused on popular stocks like TSLAx, CRCLx, and NVDAx.

Additionally, analysis of transaction data from Backed Finance and Ondo between July and October 2025 shows that 78% of transactions were for less than $100. This shows that the indirect tokenization model effectively meets the needs of retail investors 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 laws. This fully preserves legal ownership, but offers less flexibility than the indirect model. Under the indirect model, any publicly traded stock can be tokenized and freely traded after acquiring shares.

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

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

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

2.3 Compliance Infrastructure

In tokenized stocks, investor qualification typically occurs only at the time of issuance or redemption, or in a proprietary Alternative Trading System (ATS) environment. Once tokenized shares are traded on-chain or used as collateral, they enter a wallet-based, bearer transfer environment.

Consequently, controlling whether participants are accredited investors and whether trading activities are conducted within permitted jurisdictions has become a core challenge. A range of compliance infrastructure has emerged to meet this need.

• Chainlink Automated Compliance Engine (ACE)

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

CCID (Cross-Chain Identity), one of the core components of ACE, is a cross-chain identity framework used to represent investors’ credentials. Information verified off-chain (such as KYC, AML, and certification 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, while service providers do not need to access 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 such as ERC-20 and ERC-3643. It connects tokens to CCIDs, policy managers and CCIPs, enabling 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 permissioned capabilities on top of ERC-20 to control identity verification, KYC/AML status, investor qualifications, and jurisdictional access.

ERC-3643 tokens will be integrated into an on-chain identity registry called ONCHAINED when issued. The registry maps verified attributes such as KYC status and jurisdiction to wallet addresses without storing personal data. Only off-chain verified and registered addresses can receive or transfer ERC-3643 tokens.

All token operations, including issuance, transfer and staking, query the ONCHAINED registry in real time. Issuers have the flexibility to define various policies such as holding limits, transfer restrictions, country restrictions and lock-up periods.

• Securitize DS Protocol

Securitize’s DS Protocol, its proprietary compliance infrastructure, has been used to support BlackRock’s BUIDL token circulation. 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 clawbacks, which are required features for securities.

Its registry manages a list of investors eligible to hold DS tokens and stores limited regulatory attributes such as nationality and certification status without recording personally identifiable information. This approach protects privacy while ensuring compliance.

2.4 Oracle and interoperability

Nasdaq generated more than $600 million in U.S. market data revenue in 2023, while NYSE parent company Intercontinental Exchange (ICE) generated $1.4 billion in revenue from market data and connectivity services in the same year. Market data has long been the core business of traditional stock markets.

In the cryptocurrency world, oracle providers initially focused on delivering off-chain exchange prices onto the chain. As RWAs have taken off, their scope has expanded into providing real-time NAV updates for Treasury funds and precious metals spot prices.

As tokenized stocks scale, oracles are further evolving into data providers, providing not only prices but also trading environment information such as trading hours, liquidity conditions, and non-trading session status.

• Chainlink

Chainlink’s data stream aggregates prices from at least three traditional financial data providers. Off-chain prices from aggregated data and providers such as Bloomberg are verified and securely passed on-chain.

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

• Pyth Network

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

Pyth also integrates U.S. overnight stock trading data through a partnership with Blue Ocean ATS, a U.S. Securities and Exchange Commission (SEC) registered overnight exchange. This makes the reference price for tokenized stocks more reliable outside of regular trading hours.

2.5 Exchange

Exchanges are the primary venue for trading tokenized stocks. If tokenization platforms act as primary markets responsible for the structuring and issuance of shares, exchanges like Bybit and Kraken operate as secondary markets, similar to the New York Stock Exchange (NYSE) or Nasdaq (Nasdaq).

Outside of the regulated alternative trading system (ATS) environment, most tokenized stock trading currently occurs on centralized exchanges (CEX). For exchanges, tokenized shares are both a response to underlying demand from crypto-native investors and a potential source of growth. For tokenized platforms, exchanges provide distribution channels for KYC-verified users and provide deep order books supported by market makers.

Against this backdrop, exchanges such as 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 on ten xStocks assets, including COINx, NVDAx, and AAPLx. The platform only offers secondary market trading, with redemptions handled by Backed Finance and based on net asset value (NAV) for users who have completed KYC/AML verification.

To date, the cumulative trading volume of xStocks on Bybit has reached approximately US$550 million, and it has also remained steadily active during weekend non-trading hours.

2.6 DeFi

The RWA-based on-chain lending market is growing rapidly. One of the driving factors is the declining competitiveness of cryptocurrency’s native yields. As cryptoasset yields decline, so does lending demand and liquidity provider (LP) yields.

With annualized yields (APY) in the cryptocurrency market around 5% and U.S. Treasury yields approaching 4%, the incentive to participate in crypto-backed loans rather than government-guaranteed returns has diminished. Against this backdrop, the RWA-focused lending market has gained momentum. Aave Horizon launched in August 2025 and achieved $600 million in deposits and $200 million in loans in just six months.

Tokenized equities are becoming the next RWA collateral category after Treasuries. In addition to liquidation risk outside of trading hours, tokenized stocks combine relatively stable volatility with considerable upside potential, making them an attractive collateral asset.

• Kamino: Independent Fund Pool Lending

Kamino is a Solana-based lending protocol that operates a capital pool-based market. In July 2025, Kamino launched its dedicated xStocks lending pool, allowing users to borrow stablecoins against equity tokens such as SPYx, AAPLx, and TSLAx.

Each asset operates in an independent fund pool and has its own risk parameters and liquidity. Losses in one pool will not spread to other pools. xStocks has a loan-to-value (LTV) cap of just under 50%, while Ethereum collateral typically has an LTV of 70-80%.

• Loopscale: Order Book Based Lending

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

1. Loan Execution: The borrower submits a loan order, specifying the loan size, term, interest rate, and collateral, or matching an existing order. Upon execution, funds are borrowed at a fixed interest rate and xStocks collateral is locked in an escrow account.

2. Repay at Maturity: On the maturity date, the borrower repays the principal and interest and withdraws the collateral. Terms are set at execution, so repayments are predictable.

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

Order book lending offers advantages for tokenized stocks. Risk can be priced directly through negotiated LTV and interest rates. Fixed terms reduce uncertainty during non-trading hours. Because only one lender and borrower are needed to match, markets can form with extremely low initial liquidity.

Tokenized stock lending is still in its early stages. On the Loopscale platform, loop positions powered by xStocks can currently only be closed during U.S. market trading hours, a design designed to reduce out-of-hours oracle risk and price gap risk.

2.7 Others

• Pre-IPO Tokenization

Pre-IPO tokenization is the issuance of tokens tied to shares of an unlisted company. Robinhood has gone beyond public stocks to launch tokens tied to private companies like OpenAI and SpaceX, giving global investors 24/7 access to assets previously limited to private markets.

These tokens do not give investors legal ownership of the underlying shares and are not redeemable. In fact, most pre-IPO tokenized shares rely on indirect tokenization, where a special purpose vehicle (SPV) holds the shares and issues the corresponding tokens.

OpenAI has made it clear that it "has not participated in or approved any stock transfers related to Robinhood's tokenized offering," highlighting the unresolved ownership and authorization issues that remain under the model.

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

Superstate’s DIP is a compliance platform that allows public companies registered with the U.S. Securities and Exchange Commission (SEC) to issue new shares directly on-chain.

The company sets the terms of the issuance based on real-time market prices, and investors purchase shares directly from the issuer. Secondary market trading is limited to whitelisted wallets.

Superstate’s on-chain transfer agent system, Opening Bell, will update the shareholder register upon issuance. The issued tokens are considered official shares with a CUSIP identifier and have the same economic rights and voting rights as common shares.

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

3. Summary of key points

Although fiat currencies, bonds, and stocks all fall into the broad category of tokenization, there are fundamental differences between them. Fiat currencies and bonds are usage-driven assets centered around payments, collateral, and yield. In contrast, stocks are primarily meant to be held and traded. Thus, stablecoins and tokenized bonds support broader value chains and business opportunities, while tokenized stocks offer a narrower scope of new activities.

Even so, the potential impact of tokenized shares cannot be underestimated. Traditional stock market structures are inefficient, and tokenization provides a powerful tool to address these inefficiencies. It also promises to allow retail investors to participate in stock financial activities that were previously out of reach.

This transition will not be easy. Liquidity management, price discovery and regulatory coordination remain pressing challenges. But if these issues can be properly addressed, tokenized stocks have the potential to move beyond the experimental phase and into sustained adoption.