Original Article Title: "Two Weeks After the Launch of 'Stock Tokenization': Heavy Speculation, Tracking Amazon Token's Price Is 4 Times the Stock Price"

Original Article Author: Long Yue, Wall Street News

The blockchain technology is attempting to disrupt the traditional stock market, but reality is more complex than the ideal.

The start of tokenized stocks has not been smooth. Currently, digital tokens designed to track popular stocks such as Amazon and Apple have experienced significant deviations in price from the underlying stocks since they were launched two weeks ago.

Robinhood Markets is facing scrutiny from European regulatory bodies after the company previously launched a token allowing investors to bet on OpenAI without the permission of the AI startup. According to The Wall Street Journal, industry insiders are concerned that these "tokenized" stocks create opportunities for illegal actors to conduct insider trading and market manipulation, which are difficult to detect.

By the end of June, several cryptocurrency exchanges including Robinhood, Kraken, Gemini, and Bybit released blockchain-based versions of U.S. stocks and exchange-traded funds aimed at non-U.S. customers. Cryptocurrency executives stated that this is a way for global investors to invest in popular securities such as Tesla, Nvidia, SPDR S&P 500 ETF, especially in countries where it is difficult to purchase U.S. stocks through local brokers.

Significant Price Deviation Raises Questions

However, the price performance of tokenized stocks has been chaotic. According to data provider CoinGecko, on July 3rd, the price of the AAPLX token tracking Apple surged to $236.72, a 12% premium over the stock trading price at the time. Similarly, a token tracking Amazon soared to $891.58 on July 5th, four times the previous day's closing price of the stock.

A more extreme case occurred on the peer-to-peer cryptocurrency trading platform Jupiter. Blockchain data showed that earlier on July 3rd, an unidentified user attempted to purchase about $500 worth of Amazon token AMZNX, briefly driving its price up to $23,781.22, more than 100 times Amazon's previous day's closing price.

These tokens, known as "xStocks," are issued by Swiss-based Backed Finance, which collaborated with Kraken and Bybit to launch dozens of stock-tracking tokens on June 30.

However, due to xStocks trading thinly on multiple cryptocurrency exchanges, they are prone to sharp price swings when users transact beyond the market's capacity. This volatility may be exacerbated during nighttime and weekend stock market closures. A Backed spokesperson stated, "We are actively monitoring any price discrepancies and working with exchanges to ensure they are addressing this issue."

Intensified Regulatory Scrutiny

Robinhood unveiled tokenized stocks during a grand event in France on June 30. To promote this product available only to European customers, the company offered free tokens linked to OpenAI and SpaceX, both of which are not publicly listed.

OpenAI denied these tokens, stating on Twitter, "We have not collaborated with Robinhood, were not involved in this, and do not endorse it." The Bank of Lithuania, responsible for overseeing Robinhood's European operations, has contacted Robinhood requesting an explanation regarding these tokens and how they were marketed to customers.

A Robinhood spokesperson said, "We are confident in our project and are in contact with regulatory authorities to address any issues."

Skeptics are concerned that tokenized stocks could be used as a way to circumvent regulations. In the U.S. stock market, exchanges monitor manipulation and other abusive behavior, and brokers are required to know their customers' identities, allowing regulatory bodies to investigate suspicious activities and identify the parties involved.

Backed stated that transactions on a public blockchain are more transparent than traditional finance, enabling monitoring and detecting illicit activities.

However, other industry participants worry that tokenized stocks traded on anonymous platforms are the root of trouble. Carlos Domingo, CEO of tokenization startup Securitize, expressed that this arrangement could foster abuses like insider trading: "This is a Pandora's box that will explode one day because people will find a way to do illegal things with these tokens."

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