In optimistic scenarios, tokenized stocks could become the "killer app" of the crypto industry, exponentially expanding the user base and bringing millions of real-world assets onto the blockchain.
Major trading platforms like Kraken and Robinhood have now launched on-chain stock trading services, allowing investors to buy and sell tokens representing real stocks. This service enables investors to trade popular U.S. stocks (such as Apple, Tesla, and NVIDIA) 24/7, even outside normal market hours.
How It Works: A Step-by-Step Breakdown
- Asset-Backed Tokens: When you buy a tokenized Apple stock through Kraken’s xStocks, you’re not purchasing a derivative or futures contract. Instead, Kraken’s partner Backed Finance purchases and custodies the actual stock in a regulated depository, then issues a corresponding token on the Solana blockchain as its digital representation.
- Price Arbitrage Opportunities: On-chain stocks ≠ cryptocurrencies. During non-trading hours (when NYSE is closed but blockchain trading remains open), token prices may deviate slightly from the last stock price due to market sentiment. Arbitrageurs can profit from these gaps by redeeming tokens through the issuer, realigning prices.
- No Shareholder Rights: Token holders do not retain traditional shareholder rights (e.g., voting)—these remain with the custodian. Investors gain economic exposure to the stock’s performance without actual ownership, ensuring compliance while enabling blockchain-based trading.
24/7 Trading: The Standout Feature
Tokenized stocks offer continuous trading, unlike traditional exchanges (~6.5 hours/day). Kraken’s xStocks enables 24/7 trading, while Robinhood currently supports 24/5 trading (with plans for 24/7 after launching its Arbitrum-based Layer 2).
This creates unique market dynamics:
- Real-time price adjustments during after-hours news (earnings, geopolitical events).
- Tokens act as live sentiment indicators, providing price discovery even when markets are closed.
Traditional vs. Tokenized: Key Differences
1. KYC Requirements
Compliant platforms must enforce KYC—anonymous stock trading is nearly impossible legally. Past decentralized attempts (e.g., Terra’s Mirror Protocol) faced regulatory crackdowns. This time, mainstream exchanges like Kraken and Bybit facilitate trading, treating stock tokens as "memecoins" backed by real assets.
2. Custody Models
- Traditional Brokers: Hold stocks in "street name" accounts via centralized depositories.
- Tokenized Platforms: Enable self-custody via blockchain tokens, granting direct asset control (but requiring private-key management).
Why This Is Bullish for Crypto
Capital Magnet Effect
On-chain stocks lower barriers for global investors (e.g., a Nigerian retail investor buying Apple stock without complex international brokerage hurdles). This could funnel unprecedented capital into crypto infrastructure.
Compound Benefits
- Stablecoins: Increased demand for settlements.
- Layer 2 Networks: Fees from continuous trading activity (e.g., Robinhood’s Arbitrum L2).
- ETH/SOL: Value accrual via transaction burns and network effects.
Stealth Adoption
Millions may use crypto infrastructure without realizing it—e.g., Robinhood’s European users trading on Arbitrum for better UX.
Investment Opportunities
👉 Top Picks for Tokenized Stock Growth
- Stablecoins (e.g., USDT, USDC).
- RWA Sector (tokenized real-world assets).
- Ethereum/Solana (settlement layers).
- U.S. FinTech Stocks (e.g., Robinhood $HOOD, SoFi $SOFI).
FAQ
Q: Are tokenized stocks regulated?
A: Yes—issuers like Backed Finance comply with financial laws, but frameworks are still evolving.
Q: Can I vote as a token holder?
A: No. Custodians retain voting rights; token holders only get economic exposure.
Q: What risks exist in after-hours trading?
A: Higher volatility and potential price gaps vs. traditional market hours.
Q: Will this replace traditional brokers?
A: Unlikely soon—but it’s a compelling alternative for accessibility and innovation.
The future of finance is bridging real-world assets with blockchain efficiency—on-chain stocks are just the beginning.