What Problems Do Tokenized Stocks Solve? And What Can't They Solve?

I. Tokenized Stocks Are Not “Upgraded Stocks”

If users expect:

• More security
• Lower costs
• Greater freedom
• Full shareholder rights at the same time

Then reality is likely to disappoint. Tokenized stocks are not a comprehensive upgrade of traditional stocks, but rather an alternative form focused on “accessibility and composability.” Understanding this is key to avoiding misaligned expectations.

II. The Three Real Problems Tokenized Stocks Solve

Before discussing their limitations, it’s important to acknowledge that they do solve some real-world problems.

1. Accessibility: Who Can More Easily Access Global Stocks?

For many users, traditional stock trading means:

• Overseas accounts
• Complicated account opening procedures
• Cross-border capital costs
• Clear geographic restrictions

While tokenized stocks typically offer:

• A unified on-chain entry point
• Lower minimum capital requirements
• No reliance on local brokerage systems

Real value: For users who cannot or do not want to enter the traditional financial system, tokenized stocks significantly lower the barrier to participation.

2. Trading Experience: Freedom of Time and Liquidity

Traditional stock markets have clear limitations:

• Fixed trading hours
• Closed on weekends and holidays

Tokenized stocks (especially synthetic asset models) typically offer:

• 24/7 continuous trading
• No time zone restrictions
• More flexible entry and exit mechanisms

Essential improvement: They address the trading experience, not the legal or ownership attributes of the asset.

3. Composability: Stocks That “Act Like DeFi Assets” for the First Time

This is the most crypto-native feature of tokenized stocks.

In an on-chain environment:

• Stock tokens can be used as collateral
• Can participate in yield strategies
• Can be combined with stablecoins and derivatives

The innovation of tokenized stocks is not in “the stock itself,” but in bringing familiar assets into the DeFi ecosystem.

III. Four Core Problems Tokenized Stocks Cannot Solve

1. Shareholder Rights: Almost Unattainable

In the vast majority of tokenized stock structures, users:

• Do not have voting rights
• Cannot participate in corporate governance
• Lack direct, enforceable legal claims

Even if dividend mapping exists, it is entirely dependent on platform or structural execution. If users value shareholder status itself, tokenized stocks are not the right tool.

2. Legal Certainty: Still Off-Chain

No matter how transparent things are on-chain:

• Final adjudication is still done by courts
• Rights claims depend on specific legal jurisdictions
• The token itself does not inherently have legal standing

On-chain settlement does not equal on-chain adjudication.

3. Systemic Risk: Not Eliminated, Just Redistributed

Tokenized stocks do not eliminate risk, but change its structure:

• Custodial risk
• Compliance and regulatory risk
• Oracle and liquidation mechanism risk

These risks often have three characteristics:

• More hidden
• More complex
• Harder for ordinary users to understand

4. Prices Aren’t Necessarily More “Real”

A common misconception is: “On-chain trading means prices are freer and more authentic.”

In reality:

• Liquidity is relatively shallow
• Easier to manipulate
• May diverge from stock market prices for extended periods

On-chain price ≠ a more efficient price discovery mechanism.

IV. Most Users Want Stock Price Exposure, Not the Stock Itself

Weighing both advantages and limitations leads to a very practical conclusion: Most tokenized stock users are actually seeking Beta exposure to stock prices, not company governance rights. This also explains why:

• The synthetic asset model can exist long-term
• Perpetual and index products are more popular

Tokenized stocks are closer to “crypto derivatives of stock prices” rather than “digital migration of equity.”

V. What Kind of Users Are Tokenized Stocks Best Suited For?

Overall, they are better suited for:

• Users who want quick exposure to stock prices
• Traders familiar with DeFi and willing to take on mechanism and structural risks
• Those who value liquidity and strategy combinations over long-term shareholder rights

And less suited for:

• Long-term value investors
• Those emphasizing legal certainty and investor protection
• Users who require full shareholder rights and participation in governance