jakiro
Source: TokenInsight Research, compiled by: Shaw bitchain vision
summary
-
Tokenized stocks use blockchain technology to enable global investors to absorb traditional brokers to access traditional assets such as the US stock market, reducing KYC and supporting 24-hour trading.At the same time, these stocks can participate in the DeFi ecosystem as ERC-20 tokens, such as joining liquidity pools and fund security, bringing higher funding efficiency and strategic flexibility.
-
Currently, tokenized stocks are mostly synthetic assets and do not give shareholders rights (such as voting or dividends), and do not legally involve real stocks; their liquidity is susceptible to traditional stock market trading hours and the risk of price fluctuations; it is still a legal gray area in multiple jurisdictions, especially in the United States, and there may be policy suppression.
Tokenized stocks are digital assets based on blockchain that represent or reflect shares of real-world companies.Essentially, they allow investors to invest in traditional stocks through crypto tokens that can be purchased, sold and held on the blockchain network.This innovative fusion between cryptocurrencies and stocks has gained attention recently, with some major platforms starting to offer tokenized versions of popular securities.
For example, in mid-2025, Robinhood announced the launch of stock tokens for European customers, enabling them to trade more than 200 U.S. stock and exchange-traded funds (ETFs) 24 hours a day, five days a week.Similarly, Backed Finance partnered with exchanges like Kraken and Bybit to launch xStocks, offering on-chain trading of over 60 U.S. blue chip stocks such as Apple, Tesla and Amazon, which are 1:1-linked to real stocks.These developments underscore the growing belief that tokenization may change the way people invest, making the market more accessible, more efficient and trading around the clock.
At the same time, they highlight new uncertainties in regulation and investor protection.In this article, we will explore the key advantages and disadvantages of tokenized stocks on blockchain.
Advantages: Global accessibility and DeFi integration
Global accessibility and low KYC requirements
One of the most commonly mentioned advantages of tokenized stocks is greater global accessibility.By placing stocks on public blockchains, companies can provide investors who exceed the geographical restrictions of traditional stock exchanges to invest in stocks.For example, Robinhood recently launched tokenized U.S. stocks for customers in 30 European countries on Arbitrum.This means that even if EU users do not have access to the U.S. brokerage account, they can buy stocks in U.S. companies such as Apple or Tesla through tokens.These platforms usually have lower requirements for KYC, especially compared to traditional brokerage firms.Some tokenized stocks are transferable ERC-20 tokens; as we will introduce in the next section, these tokens can be traded on-chain via decentralized exchanges without any KYC requirements.
What is also important is the improvement of user experience.Platforms like Robinhood are integrating tokenized stocks into a familiar, user-friendly interface, lowering the entry barrier for non-cryptocurrency users.It is worth noting that Robinhood’s app does not need to manage separate cryptocurrency wallets or mnemonics when trading these stock tokens.Users can easily get blockchain-based stock exposure as they use traditional brokerage applications.By bypassing regional restrictions and technical difficulties, tokenized stocks can open the stock market to a wider audience.
Source: https://robinhood.com/eu/en/invest/
All-weather trading and DeFi integration
Trading time in traditional stock markets is limited.In contrast, tokenized stocks have the potential to trade around the clock like cryptocurrencies, i.e. trading 24 hours a day, 7 days a week.Currently, tokens for some products such as xStocks and Robinhood are almost ready to trade (initially 5 days a week, 24 hours a day).
In addition to extending trading hours, tokenized stocks may also be integrated into the decentralized finance (DeFi) ecosystem to increase compositionality and new financial application scenarios.Once stocks exist in the form of on-chain tokens, they become programmable financial LEGOs.
A particularly vivid example of programmable finance comes from Backed Finance.The agreement submits orders to partner brokers to acquire real-world stocks and then mints the corresponding bSTOCK token – unrestricted ERC-20 tokens.These bSTOCK tokens can be freely traded or added to the DeFi liquidity pool.Retail investors can buy bSTOCK or wbSTOCK directly on the chain and provide liquidity in an automated market maker (AMM).For example, users have created liquidity pools that pair bSTOCK tokens with stablecoins on DeFi platforms such as Gnosis’ Balancer and Swapr, Base’s Aerodrome, and Avalanche’s Pharaoh.
Source: https://defi.backed.fi/
To date, the total liquidity (TVL) of these fund pools is close to US$8 million, with an average annualized rate of return of up to 163%.Although the scale is still relatively small at present, this shows how tokenized stocks can become profit-generating assets in the DeFi economy, highlighting the programmability and economic utility of on-chain stocks.
Risk diversification
Whether it can be converted into real stocks or not, tokenized stocks can bring investors underlying assets that are less relevant to the crypto market.Considering that the U.S. stock market offers not only stocks, but also exchange-traded funds (ETFs) that include other non-equity exposures, such as GLD (gold exposure), TLT (treasury bond exposure), etc.As shown in the figure below, the correlation between GLD (Port 3) and IBIT is only 0.07, while the correlation between QQQ (Port 2) and IBIT is only 0.57, and the correlation between TLT (Port 1) and IBIT is only -0.79.
Source: www.portfoliovisualizer.com
Low correlation and negative correlation means investors can diversify their portfolios by combining exposure to these underlying assets, thus avoiding significant losses from excessive investment concentration when the market crashes, which was difficult to do before.
New strategy
Similarly, some strategies that were previously difficult to operate in the cryptocurrency market have become feasible now due to the multiple exposures brought by tokenized stocks.For example, long-short trading across assets—a strategy that could only be executed in traditional markets—can now be implemented gradually in the cryptocurrency market.In addition, in theory, some strategies that combine cryptocurrency markets with traditional markets can also be executed in cryptocurrency markets at relatively low costs.
For example, looking for arbitrage opportunities in BTC, BITO and IBIT options is like SPY’s diversified trading.Cryptocurrency institutions usually choose to regularly sell backup call options and cash-guaranteed put options for medium- and long-term fund management, realizing the function of “buying bitcoins at low levels, selling bitcoins at high levels, and obtaining additional income”. This systematic option sale behavior is quite common in the cryptocurrency market.In the U.S. stock market, retail investors often use options as leverage tools and are willing to pay a relatively high premium for this.
Therefore, market makers usually hold more positive gamma values in Bitcoin options and more negative gamma values in IBIT options.This means that once an event occurs, the hedging behavior of the market makers will stabilize the price of Bitcoin, but will increase the price fluctuations of IBIT, thus bringing trading opportunities.When holding tokenized stocks and their derivatives, investors can easily arbitrage on a single exchange, enjoy the capital efficiency advantages brought by portfolio margins, and eliminate cross-exchange risks – a feature that was not available when executing similar strategies before.
Disadvantage 1: Not a real stock at the moment – lack of shareholder rights
A key drawback of current tokenized stocks is that they usually fail to give holders the same rights as they actually hold the stock.In most implementations, these tokens are essentially synthetic derivatives of stocks, not stocks themselves.For example, under EU regulations, Robinhood’s tokens are considered derivatives—each token is backed by real stocks held by a licensed broker or special entity, but the token holder does not directly own the stock.Similarly, Backed Finance’s xStocks on Solana are also supported by stocks stored in a special purpose entity (SPV) in Liechtenstein.The SPV or custodian holds the actual stock, and the tokens on the chain are just claims to these underlying assets.
Due to this structure, token holders lack standard shareholder rights such as voting at company meetings or influencing management, and in some cases, they may not even be able to automatically receive dividends (unless the issuer chooses to transfer it).Critics point out that holding tokenized equity “is just a synthesis of shares… does not give any shareholder rights and protections brought about by real ownership.”
A classic example is Robinhood’s investment in tokenization of private companies such as SpaceX and OpenAI.These tokens allow investors to access price fluctuations in these companies, but have no equity rights because the companies themselves do not authorize or endorse the tokens.In fact, OpenAI has publicly condemned Robinhood for issuing tokens pegged to its stock as an unauthorized and potentially illegal act.
Disadvantage 2: Poor liquidity
The liquidity risk of tokenized stocks may be somewhat more serious than altcoins.Since the liquidity of tokenized stocks mainly relies on the bridge with the US stock market and adopts a 7×24-hour trading mechanism in parallel with the crypto market, this means that during the US stock market closing, the price of tokenized stocks may experience “unexpected fluctuations” and there is a significant price manipulation risk, which will cause significant losses to investors.
Meanwhile, due to the additional price and time costs incurred by operating through bridges, the transaction costs of tokenized stocks are higher than those of traditional markets, and these costs may be difficult to reduce in the short term.
Due to liquidity issues caused by transaction costs, tokenized stocks can only attract investors who are relatively insensitive to transaction costs, such as market makers who want to gain investment exposure outside normal trading hours to hedge potential price volatility risks.However, for most retail investors, transaction costs may lead them to opting to invest directly in the U.S. stock market through brokers.
Disadvantage 3: Legal gray zone and regulatory uncertainty
The regulatory status of tokenized stocks is uncertain at best, and may be illegal at worst.These products are in a legal gray area in many jurisdictions.Robinhood’s tokenized U.S. stock is currently only available in Europe (EU) and is regulated by the Bank of Lithuania because of the uncertainty in the U.S. regulation.U.S. regulators may find such issuances violate securities laws or exchange regulations, especially if they circumvent existing rules.Worryingly, tokenized stock platforms may operate in like unregistered exchanges or brokers.
Another particularly sensitive issue is the tokenization of private stocks (pre-listed companies).As mentioned earlier, Robinhood attempts to sell tokens that track private companies such as OpenAI, essentially bypassing the disclosure and transparency rules that regulate public companies.Typically, companies raise funds through initial public offerings (IPOs), which triggers strict financial disclosure and investor protection requirements.If tokenization allows companies to raise funds from the public without IPOs – and without these disclosures – this would pose a serious regulatory challenge.If companies can directly attract retail investors through tokenized stocks, why do they still have to go through a costly IPO process?
Overall, until relevant laws are improved, providers of tokenized stocks are always on the high-voltage regulatory line.Even if the current environment (such as the SEC’s more crypto-friendly attitude toward cryptocurrencies under some leadership) seems loose, these products must comply with existing securities laws.
