Original Title: "Huobi Growth Academy | Stock Tokenization In-Depth Research Report: Initiating the Second Growth Curve of the Bull Market"

Original Source: Huobi Growth Academy

1. Introduction and Background

Over the past year, the concept of Real-World Assets (RWA) tokenization has gradually transitioned from the edge narrative of financial technology to the mainstream vision of the crypto market. Whether it is the widespread application of stablecoins in the payment and settlement field or the rapid growth of on-chain government bonds and note-like products, the "on-chain of traditional assets" has transformed from an idealized vision into a tangible experiment. In this trend, stock tokenization, also known as "Tokenized Stocks," has become one of the most controversial and promising tracks. It carries not only an attempt to transform the liquidity and transaction efficiency of the traditional securities market but also involves challenges in regulatory boundaries and the opening of cross-market arbitrage opportunities. For the crypto industry, this may be a quantum leap that brings a trillion-dollar asset pool into the on-chain world; for traditional finance, it is more like an "unauthorized" technological breakthrough that brings both an efficiency revolution and lays the groundwork for governance conflicts.

2. Market Status & Key Pathways

Although "tokenization" has become one of the most important medium- to long-term narratives in the crypto industry, when it comes to specific asset classes such as "stocks," its progress remains slow, with significant path divergences. Unlike standardized assets such as government bonds, short-term notes, and gold, stock tokenization involves more complex legal ownership issues, transaction timeliness, voting rights design, and dividend distribution mechanisms, leading to several products currently in the market showing distinct differences in compliance paths, financial structures, and on-chain implementation methods.

One of the projects that achieved early success in this field is Backed Finance. This Switzerland-based fintech company collaborated with regulated securities custody institutions to launch several ERC-20 tokens based on real-world stocks and ETFs, attempting to establish an "on-chain security bridge." Taking its well-known product, wbCOIN, as an example, the token claims to be pegged 1:1 to real stocks on Nasdaq via Coinbase, with custodians Alpaca Securities and InCore Bank committing to redeeming real stocks, theoretically possessing a closed-loop logic of "purchase-hold-redeem." Backed also introduced tokens for assets such as NVIDIA (BNVDA), Tesla (BTESLA), S&P 500 ETF (BSPY), using chains like Base and Polygon as circulation carriers, providing investors with on-chain trading access. However, there is still a gap between ideal and reality.

As of March 2025, the total value locked (TVL) of multiple stock token products launched by Backed has not yet exceeded $10 million, and the daily average trading volume of wbCOIN is even less than $4,000, with trading records approaching zero for most time periods. The reasons for this situation are not singular. It involves early users' uncertainties about the redemption mechanism, the DeFi ecosystem's failure to fully integrate these tokens into real-world use cases, and even some on-chain market makers' judgment that such assets do not have "long-term liquidity expectations." This means that even though the product mechanisms have achieved clear asset mapping and a complete custody chain, a lack of trading depth, use cases, and user awareness may still lead tokenized stocks into a "compliant but deserted" predicament.

Compared to Backed, Robinhood's path to tokenization appears more conservative but more systematic. As a platform that has been cautiously establishing its presence in the crypto business for a long time, Robinhood has chosen to launch regulated stock derivative tokens in the European Union region. These tokens are not fundamentally mapped to real stocks but are price-tracking derivative instruments based on an EU Multilateral Trading Facility (MTF) license. The logic behind this is closer to traditional CFDs (Contracts for Difference), where traders do not actually hold the underlying stocks but hold rights and obligations on the price fluctuations of the benchmarks. Although this design sacrifices the on-chain purity of "1:1 anchored real stocks," it significantly reduces regulatory conflicts and custody complexity, thereby achieving a "non-securities but tradable" compromise.

Robinhood provides full UI support, asset splits, dividend distribution, leverage settings, and other services, and safeguards user rights through its proprietary custody account system. More importantly, its future plans to launch a Layer-2 network (tentatively named Robinhood Chain) also mean that Robinhood is embedding tokenized stocks into its native wallet and crypto trading platform as an "application chain." This top-down constructed closed-loop ecosystem may be more suitable for new user onboarding, but it also limits the openness of asset circulation, and currently, trading hours are still restricted to the opening hours of the European financial markets, and the on-chain nativeness is still insufficient.

On the other hand, the xStocks ecosystem launched by Kraken and its partners offers a different path of imagination. Built on the Solana blockchain, this solution uses Backed to provide underlying asset tokens, bypasses U.S. regulations through structured compliance, and opens the product to non-U.S. markets globally. The key feature of xStocks lies in the "DeFi-ization" of its trading attributes: all tokens are tradable 24/7, feature T+0 settlement, on-chain swaps, and interoperability with stablecoin liquidity provisioning, theoretically integrating into existing DeFi toolchains such as lending, perpetual contracts, cross-chain liquidity bridging, and more. The system also attempts to aggregate trading depth through on-chain liquidity pools and establish initial connections with Solana-native DEXs like Orca and Jupiter. This on-chain native, globally distributed, composable attribute undoubtedly represents the "ultimate vision" of tokenized stocks, aiming to build not just price-mapping products but to create a truly intertwined cross-market that combines traditional financial assets with crypto infrastructure.

However, xStocks' current biggest challenge still lies in limited user coverage, the need for KYC verification for real subscriptions/redemptions, and the unresolved question of whether its custody path has cross-border legal validity. Furthermore, although its trading experience and mechanism have reached the "crypto-native" standard, the actual user base and on-chain liquidity have not yet achieved economies of scale, indicating that there is still a long way to go before mainstream adoption.

From the layout differences of these three, it can be seen that there is no unified standard for current stock tokenization. Instead, each project designs its path based on its own strengths, regulatory environment, and ecosystem resources. Among these, Robinhood emphasizes "regulated traditional trading experience plus crypto packaging," Backed emphasizes "on-chain tool contracts that map real assets," and Kraken leans more towards "building a crypto-native liquidity market." The different paths of these three not only demonstrate the diversity of this race but also reveal a typical feature of an immature market: no one can achieve full coverage among compliance, asset mapping, and user needs. Ultimately, validation and selection still need to be carried out through time testing and market feedback.

It can be said that tokenized stocks are still in a very early experimental stage. Although they have a theoretical closed loop, their on-chain activity and financial efficiency are still far below expectations. The key to their future development depends not only on whether the product design is perfect but also on whether three key elements can converge: first, whether they can attract more real liquidity providers to enter their liquidity pools to form a price discovery mechanism; second, whether they can integrate more diverse DeFi applications to enhance the use cases of tokenized stocks; third, whether regulations gradually clarify red line boundaries, allowing platforms to expand their service scope with confidence, especially to cover U.S. users. Until these paths are integrated, tokenized stocks are more like a financially promising experiment rather than a growth engine that can fulfill bullish market expectations at the current stage.

III. Compliance Mechanism and Implementation Capability

In all discussions about tokenized stocks, regulation has always been the looming Sword of Damocles. As one of the most tightly regulated financial assets, stocks are subject to strict legal constraints at every stage, such as issuance, trading, custody, and clearing, within their jurisdiction. In traditional finance, securities must be registered or exempted to be legally sold, and trading venues must also obtain licenses such as exchanges or ATS (alternative trading systems). Refactoring these securities as "on-chain assets" means that not only must the technical mapping issue be solved, but a clear and executable compliance path must also be established. Otherwise, even with excellent product design, it is challenging to overcome limited use cases, inability to promote to accredited investors, or even legal risks associated with illegal securities issuance. In this respect, the choices and differences between different projects are particularly striking and precisely determine whether they can truly move towards scaled implementation in the future.

Using Backed Finance as an example, it has taken an approach closest to the "traditional securities issuance logic" on the compliance path. The stock tokens issued by Backed essentially belong to Restricted Securities recognized by Swiss regulatory authorities. This means that the token buyers must complete KYC/AML verification, commit not to sell to U.S. investors, and face restrictions on secondary market trading limited to "accredited investors only." While this approach is relatively robust in terms of compliance, avoiding crossing the red line with the U.S. SEC, it also brings about the issue of limited liquidity, preventing the realization of the token's vision of free trading on the public blockchain.

A more realistic challenge is that this "Restricted Securities" model requires every transfer to undergo compliance checks, greatly undermining its composability with DeFi systems. In other words, even though Backed has successfully established a custody mapping relationship between tokens and real stocks with InCore Bank and Alpaca Securities, what it has built is still a closed ecosystem within a "regulatory sandbox," making it difficult to achieve high-frequency trading, collateralization, leverage, and other applications in an open finance scenario.

The path taken by Robinhood is a more clever compliance packaging. Its tokenized stock product does not directly mirror real stocks but is built on the "securities derivative" framework established by the EU's MiFID II regulatory framework, technically similar to a Contract for Difference (CFD), and supported by its regulated subsidiary for quoting, custody, and clearing. This design allows Robinhood to avoid direct ownership of stocks' legal responsibility, as well as the issues of peer-to-peer trading and physical delivery, thereby enabling it to offer related product trading without a securities license. The advantage of this path is its relatively high compliance certainty, allowing rapid listing of multiple underlying stock tokens and promotion through its existing user base; however, the trade-off is that the assets themselves lack programmability and openness, unable to be truly embedded in native on-chain financial protocols.

Furthermore, this "platform custody + derivative tracking" model fundamentally still falls under the category of CeFi (centralized finance), where the issuance and clearing of assets almost entirely depend on the Robinhood system internally. User trust in the underlying assets is still based on trust in the platform rather than on-chain autonomous custody and verification mechanisms.

In the cases of Kraken and xStocks, we see a more aggressive, orthodox approach to compliance. The tokenization mechanism behind xStocks is supported by Backed, but in terms of circulation and usage, it has taken a "on-chain autonomous + global non-U.S. user access" gray compliance path. Specifically, this model leverages the exemption clause of "Restricted Securities + private issuance" in Swiss law, allowing Kraken to open its tokenized products to trading for the global non-U.S. market and restrict access for U.S. IPs through on-chain contracts.

This approach not only avoids direct scrutiny by the SEC and FINRA on the issuance of securities and exchange operation but also preserves the token's free circulation on-chain, enabling access to DeFi lending protocols, AMM liquidity provision, cross-chain bridges, and other modules, forming a relatively complete financial ecosystem. However, the risk of this approach lies in its heavy reliance on the technical isolation of "non-U.S. user identity." If there is a widespread circumvention of the restrictions by users, it may still be considered as "illegally offering securities to U.S. investors," thus triggering enforcement risks. Moreover, U.S. regulatory agencies' determination of "de facto market participation" often extends beyond technical barriers and is based on the consequences of actions and the actual nationality of investors. This means that even if Kraken tries its best to avoid issues, it may still face potential regulatory inspections or sanctions.

Looking more broadly, currently, whether it's Backed, Robinhood, or Kraken, none of their tokenized stock schemes have achieved true global compliance coverage but rather operate more as a strategy of "regional arbitrage + operating within legal loopholes." The fundamental reason for this situation is the significant differences in how countries around the world define securities. Taking the United States as an example, the SEC still considers "any token based on anchoring real equity value" as a security, and its issuance must comply with the Howey Test or exemptions such as Reg A / Reg D.

In contrast, the EU is relatively lenient, allowing some tokens based on derivative structures to trade under the jurisdiction of an MTF or DLT Pilot Regime; as for countries like Switzerland and Liechtenstein, they attract project teams to conduct pilot issuances through sandbox regulation and a dual-registration system. This regulatory fragmentation has created significant regulatory arbitrage opportunities, presenting a situation where the tokenization of stocks is in a state of "regional compliance and global gray areas."

In this complex landscape, for the tokenization of stocks to truly achieve large-scale implementation in the future, it will inevitably rely on breakthroughs in three areas. First is the uniformity of regulatory recognition and the establishment of exemption channels, requiring systems like the EU's MiCA, the UK's FCA sandbox, Hong Kong's VASP, etc., to design a legal and replicable compliance template for tokenized securities; second is the native support of on-chain infrastructure for compliance modules, including standardized tools such as KYC modules, whitelist transfers, on-chain audit trails, etc., to embed compliant securities truly into the DeFi ecosystem, rather than becoming liquidity islands; and third is the entry of institutional participants, especially custodian banks, auditors, brokerages, and other financial intermediaries' collaborative participation to address the issues of asset authenticity and trust in redemption mechanisms.

It can be said that the compliance mechanism is not an ancillary issue of stock tokenization but a key variable in its success or failure. No matter how decentralized a project is, its foundation still rests on the logic of "whether real-world assets can be credibly mapped"; and the core issue behind this is always whether the legal framework can accept the existence of a new paradigm. It is for this reason that when studying tokenized stocks, we should not only focus on mechanism innovation and technical architecture but also understand the boundaries and compromises of institutional evolution and find a viable middle ground between regulatory reality and ideal on-chain scenarios.

4. Market Analysis and Future Outlook

The total value of Real World Assets (RWA) on-chain globally is approximately 17.8 billion USD, with equities accounting for only 15.43 million USD, representing just 0.09% of the total. However, tokenized equities have more than tripled in value in the past six months, rising from 50 million USD in July 2024 to ~150 million USD in March 2025.

When we reexamine the performance of tokenized equities in this space, we can see that it possesses strong conceptual attractiveness but faces extremely complex real-world implementation challenges. From a theoretical perspective, tokenizing equities has clear structural advantages: on the one hand, it maps the most valuable and well-recognized real-world assets onto the blockchain, bringing a real-world credit anchor to the crypto ecosystem; on the other hand, it achieves trade automation and real-time settlement through smart contracts, disrupting the fundamental logic of traditional securities markets relying on centralized clearinghouses and T+2 settlement cycles, unleashing high systemic efficiency. However, in practice, these advantages have not yet translated into widespread adoption but have instead long been in an awkward state of "mechanism establishment, scenario absence, and liquidity drought." This compels us to further consider: what is the true growth engine of tokenized equities? Is it possible for them to become a core asset class in crypto finance in the future like stablecoins or on-chain bonds?

Structurally, the primary value of tokenized equities lies in "connecting the real-world market with the on-chain market," but true incremental demand must come from three user groups: first, retail investors who want to bypass traditional financial institutions and participate in the global stock market with lower barriers to entry; second, high-net-worth individuals and gray funds seeking asset cross-border mobility to circumvent capital controls or time zone restrictions; third, DeFi protocols and market makers aiming for arbitrage and structural profits. These three groups collectively shape the "potential market" for tokenized equities, but none of them has truly entered on a large scale. Retail investors often lack on-chain operation experience and confidence in the mechanism of whether they can redeem for real-world stocks; high-net-worth users have not yet confirmed whether such assets have sufficient privacy protection and hedging attributes; and DeFi protocols tend to focus more on building structural products around high-frequency trading, stablecoins, and derivatives, showing limited interest in stock-like assets lacking volatility and liquidity. This means that tokenized equities currently face a typical market mismatch problem of "financial assets wanting to go on-chain, but on-chain users not yet ready to accept."

Nevertheless, future inflection points may gradually emerge with several key trends. Firstly, the rise of stablecoins has provided a solid currency foundation for trading and settling tokenized equities. When stablecoins like USDC, USDT, PYUSD become the "digital dollars" of on-chain liquidity, tokenized equities naturally gain a universal trading asset. This allows users to trade US stocks without accessing the banking system, lowering entry barriers and capital switching costs, especially crucial for users in developing countries. Secondly, the maturation of DeFi protocols is gradually establishing the ability to "upload traditional assets to the chain." With the emergence of tokenized government bonds, tokenized money market funds, and other assets, the market's acceptance of "on-chain non-crypto-native assets" has significantly increased, and stocks are undoubtedly the next standard asset type that is poised to be introduced. If in the future, a portfolio tool containing "stocks + bonds + stablecoins" can be formed, it will be highly attractive to institutional users, and may even evolve into a "chain-based ETF / index fund" similar to traditional brokerages.

Another crucial variable is the explosion of Layer 2 (L2) and application chain ecosystems. With the expanding user base of Ethereum Layer 2 networks such as Arbitrum, Optimism, zkSync, and StarkWare, and the enhanced financial nativeness of high-performance chains like Solana, Serum, and SushiSwap, the "on-chain residency" of stock tokens is no longer limited to isolated asset issuance platforms but can be directly deployed on chains with deep liquidity and developer bases. For example, if Robinhood's Robinhood Chain successfully embeds its multi-million user trading data and fund flows, along with on-chain wallet compliant onboarding and KYC custody tools, it could theoretically build a hybrid financial model of "centralized user experience + on-chain asset architecture" within a closed-loop ecosystem, thereby driving the actual usage frequency of stock tokens and financial portfolio complexity. Similarly, projects like xStocks in the Solana ecosystem may gain structural advantages in scenarios such as arbitrage, perpetual contracts, and dollar-cost averaging due to their high-frequency trading capabilities and low fee advantages.

Simultaneously, from a macro financial cycle perspective, the emergence of stock tokenization coincides with a critical stage where the global capital markets and crypto markets are beginning to further converge. With the approval of Bitcoin ETFs, RWAs becoming the on-chain focus of traditional institutions, the crypto world is transitioning from an "island economy" to a "global asset-compatible system." In this context, stocks are undoubtedly the most symbolic connection point. Especially as investors seek more flexible, efficient, and 24/7 cross-border allocation tools, tokenized "stocks" are likely to become the core springboard for global capital flows. This also explains why traditional asset management giants like Franklin Templeton and BlackRock are researching security tokenization, on-chain investment funds, and other new structures, with the aim of laying the groundwork for the next phase of market structure change.

Of course, in the short term, stock tokenization still faces several practical constraints. Liquidity remains scarce, the cost of user education is high, the compliance path is full of uncertainty, and the asset mapping mechanism still carries a high trust cost. More importantly, there hasn't been a clear leader with a "first-mover advantage" yet, lacking standard assets like USDC, WBTC, and sDAI that have become protocol components. This means that the current market is still in an exploratory phase, with each project trying to tackle compliance and usability challenges in different ways, but standardization and scaling will take time and patience.

However, precisely because of this, stock tokenization may be at a "severely underestimated early starting point." It does not directly assume the currency function like stablecoins, nor does it possess the native network effects of ETH and BTC. Instead, its ability to represent the "on-chain mapping of the real world" is becoming a key puzzle piece connecting the two systems. The projects with true explosive potential in the future are likely not some new asset but rather a "compliance integration platform" that can integrate asset custody, trade matching, KYC verification, on-chain portfolio, and off-chain settlement, aiming not to completely replace traditional brokerages but to become the "Web3-compatible layer" of the global financial system. When such a platform has a sufficient user base and infrastructure support, stock tokenization will no longer be just a narrative but will become a core part of the on-chain capital market.

5. Conclusion and Recommendations

Looking back at the development of stock tokenization, we can clearly see a typical cyclical phenomenon of "technology-first, compliance lagging, market waiting." This technology is not a recent invention, nor is it a difficult-to-understand financial engineering problem. The underlying mechanism—mapping real stocks to on-chain assets to enable global, 24/7 trading and composability—has been thoroughly validated in both the technological and financial dimensions. However, the real issue lies not in whether the mechanism itself is feasible, but in how this mechanism can find a viable path to take root and expand steadily in the complex real-world regulatory context, financial infrastructure, and market inertia. In other words, the reason why stock tokenization has not yet experienced explosive growth is not that it is not "good enough," but rather that it is not yet "mature enough," not yet "usable enough," and has not truly hit a strategic node where a policy window intersects with financial demand.

However, this situation is quietly changing. On the one hand, traditional capital markets' acceptance of blockchain is rapidly increasing, from Blackstone's on-chain funds to JPMorgan's on-chain settlement network, and to the Ethereum-based RWA infrastructure led by BlackRock, all sending a strong signal: real-world assets are gradually being tokenized on-chain, and the future financial infrastructure will no longer be a binary opposition between "traditional and crypto" but a fusion in the middle ground.

In this overarching trend, stocks, as one of the most mature real-world assets, naturally have significant value in on-chain mapping. On the other hand, the crypto-native ecosystem itself is transitioning from pure speculation to a stage of structural development. From stablecoins and lending protocols to on-chain bonds and ETFs, users are beginning to demand higher standards of "stability, liquidity, compliance" for assets. Stocks as an asset class can play a pivotal role in this shift—representing both the real world's credit cornerstone and being able to be embedded in smart contracts and DeFi modules through tokenization as a crucial part of on-chain investment portfolios.

Therefore, stock tokenization is not just an "interesting narrative" but a medium- to long-term opportunity track with a genuine foundation of demand, policy game space, and technological implementation path. For industry practitioners, there are several clear directions for recommendations here.

First, when entering the field of stock tokenization, project teams must prioritize "compliance path design" over technical innovation or user experience optimization. Projects that truly have the opportunity to grow and succeed will be those that can build a legal and compliant issuance structure and on-chain trading mechanism within jurisdiction-friendly areas such as Switzerland, the EU, the UAE, and Hong Kong. Technology is only a prerequisite, institutions are the boundaries, and compliance is the moat to growth.

Second, the essence of asset tokenization is "infrastructure-level asset issuance," which means that its value does not depend on the popularity of a particular stock but on whether the entire system can interface with more on-chain protocols to become a standard asset component. Therefore, stock tokenization projects must actively integrate with various DeFi protocols, driving the implementation of composite products such as "rTSLA collateralized loans," "aAAPL perpetual contracts," and "SPY ETF token re-collateralization." Otherwise, even with compliance and custody, they will only end up as "conceptual tools" in low-frequency trading scenarios.

Furthermore, user education is equally crucial as product packaging. On-chain stock trading cannot continue to maintain its current high barrier of entry form, which is understood only by "professional players." Instead, it should proactively learn from platforms like Robinhood, eToro, Interactive Brokers, and others, and introduce familiar UI language, simplified trading processes, and visualized profit structures to minimize the user onboarding threshold. This will truly bring traditional investors into the crypto world. For the average user, the logic of being able to buy a share of AAPL using an on-chain wallet is far more appealing than understanding whether the custody structure behind it is based on a CSD.

Lastly, policy engagement and regulatory dialogue must come first, especially in regions actively promoting RWA policy innovation such as Hong Kong, Abu Dhabi, and London. This should drive the formation of industry self-regulatory organizations, technical standard templates, and regulatory sandbox pilots. The ultimate success of stock tokenization does not lie in whether a more complex asset packaging structure can be built, but in whether policymakers can believe this is a "controllable, incremental, and beneficial financial innovation," rather than another blow to and challenge of the existing financial order.

In conclusion, stock tokenization is a proposition full of tension. It connects the oldest financial assets with the latest technological paradigms, representing a collective demand for "capital flow liberalization" and "financial infrastructure restructuring." In the short term, it will still be a battle of regulation, cognition, and trust; but in the long term, it may become the "third pillar" in the development process of on-chain finance, following stablecoins and on-chain government bonds. This is not a hype topic but a deep water area, one of the few directions truly worth long-term engagement and investment over a 3–5 year period. If the fundamental logic of the next bull market is "on-chain real economy," then on-chain stocks are likely the most tangible, most valuable-supported, and most regulatory controversial breakthrough.

For investors and institutions, we recommend considering the following in the short term, medium term, and long term:

Short Term: Focus on product launches, total value locked (TVL), liquidity provision mechanisms, on-chain trading data, and regulatory developments (such as MiCA, SEC guidelines).

Medium Term: Evaluate whether the platform joins perpetual contracts, leverage mechanisms, DeFi support, as well as on-chain metrics such as funding costs and liquidity efficiency.

Long Term: Pay attention to whether trading permissions for U.S. users open up, the path towards achieving T+0 settlement integrated with compliance mechanisms, and the capital redistribution trend between on-chain funds, altcoins, and new assets.

In summary, the tokenization of U.S. stocks is a "vital experiment" in the restructuring of the crypto market's infrastructure. While it may not have explosive trading volume at the moment, it is accumulating the foundational groundwork for the second bull market. If compliance openness, on-chain liquidity, and mechanism innovation can be realized, this "old wine in a new bottle" may become the key engine that truly drives the next wave of growth in the crypto market.

This article is contributed and does not represent the views of BlockBeats.

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