Three major models of US stock tokenization from Robinhood and xStocks: How to break through liquidity shortages and regulatory pressures?

Against the backdrop of the U.S. government’s regulatory easing and the soaring RWA narrative, tokenized stocks have rapidly emerged, with platforms or products like Bybit, Robinhood, and xStocks pushing forward quickly, making “on-chain trading of U.S. stocks” a current hot topic. This article will delve into various tokenized stock models today, review the lessons learned from the last round of failures, analyze the current bottlenecks, and explore possible solutions for its future implementation.

(This article is compiled from Wu’s Blockchain “The Explosion of US Stock Tokenization: Bybit, Robinhood, and Kraken Launch on the Same Day, the Biggest Narrative of This Cycle?”, translated, supplemented, and compiled by Chain News )

3 + 1 mainstream models face off: from third-party issuance to brokerages creating their own chains

Currently, there are three main technologies and operational models for tokenized stocks in the market, each representing different regulatory strategies and product positioning. The fourth one is an addition by the author, which is the possible operation method revealed by Ondo Finance according to the documents, and it has not yet been officially implemented.

Third-party issuance + on-chain and off-chain exchange integration: Integrating DeFi as a highlight

xStocks launched by Backed Finance are backed by a regulated issuer who purchases a batch of physical stocks (TSLA) through US and Swiss brokers and custodians, and then mints corresponding Tokens (TSLAx) on the Solana blockchain at a 1:1 ratio. These Tokens are then listed on exchanges such as Kraken and Bybit, as well as DEXs like Jupiter and Raydium for round-the-clock trading, and enjoy benefits such as dividend distribution.

( Collateralizing US Stocks for Lending? Analyzing How xStocks Partners with Solana to Maximize Tokenization Securities Liquidity )

This model has strong DeFi scalability, but the compliance responsibilities are concentrated on the issuer, which may pose platform risks.

Licensed brokers build their own chain to provide a one-stop service: the most compliant but not simple.

Robinhood has launched stock tokens based on the Arbitrum technology architecture and plans to introduce its own L2 “Robinhood Chain”. This model autonomously completes issuance, settlement, clearing, minting, and burning, providing high compliance and user experience. However, development costs and regulatory requirements have also increased relative to this, and the platforms that can be implemented remain limited.

(Robinhood launches tokenization of stocks in the EU, allowing users to receive OpenAI and SpaceX Tokens )

Contract for Difference ( CFD ) Mode: Do not buy actual stocks, purely bet on direction

Similar to Bybit’s TradFi interface, it provides derivatives of US stock contracts for difference through the integration of the MT5 system, offering price-based long and short leverage services without the need for physical custody, making it suitable for short-term speculators. This trading model is convenient and has a low threshold, but users do not have shareholder rights and regulations are stricter in various countries, often only available to specific offshore markets.

( on-chain US stock trading in progress! Bybit, Ostium, and MYSTONK have all launched stock trading features )

Wrapped Token + Exchange Original Liquidity: Ondo Keeps Prices Accurate

The Global Markets model launched by Ondo Finance is a designed and optimized “wrapped token (wrapped token)” system. When users purchase tokenized stocks with stablecoins, Ondo instantly buys the physical stocks on traditional exchanges (TSLA), which are held in custody by regulated brokers, and subsequently mints tokens representing those stocks (TSLAon) to return to the users.

This model features a complete daily reserve review and guaranteed settlement terms, emphasizing direct access to the original liquidity of traditional financial markets through on-chain transactions, ensuring price optimization. This design does not require the participation of the original issuing company, possesses high compliance and scalability, and may be a more suitable solution for traditional institutions.

(Ondo Finance launches Ondo Chain: a full on-chain network designed for tokenization of asset trading)

Looking back at past cases: from FTX to Mirror, the road to tokenization has been bumpy.

During the last bull market, tokenized U.S. stocks sparked a wave of enthusiasm, but most projects ultimately went quiet. Below, we will review them one by one.

FTX offers US stock trading: Do “equity tokens” allow you to buy stocks?

FTX partnered with the German licensed broker CM-Equity and the Swiss digital asset company Digital Assets AG to launch tokenized US stock trading, which once set a monthly trading volume record of 900 million USD. At that time, it was unable to obtain comprehensive regulatory approval due to being in a compliance gray area. Ultimately, the service also failed due to the bankruptcy collapse of the FTX exchange, and it was even discovered during the liquidation that FTX had not actually purchased and custodied the corresponding stocks.

( Interview with FTX CEO SBF | Can you actually own Netflix stock using cryptocurrency? )

Binance stock token: Rapidly shut down under regulatory pressure.

Binance also partnered with CM-Equity to list stock trading, but was forced to quickly delist within just three months due to pressure from regulatory statements from the UK’s FCA and Germany’s BaFin, exposing the risks of centralized platforms hastily launching securities products.

( Salute again to FTX! How is the Binance version of equity tokens different? FTX founder: They should still be in the testing version ).

Mirror Protocol and Synthetix: Decentralized synthetic tokens are not a panacea

Mirror uses synthetic asset (mTSLA), allowing users to mint stock tokens linked to US stock prices by collateralizing with stablecoins, which do not confer ownership rights (. However, after the collapse of Terra, it lost its value support and ultimately decoupled to zero. Synthetix also delisted its synthetic stock product )sTSLA( due to low trading volume and risk management issues, proving that products lacking physical support and market demand will eventually be eliminated.

The above multiple cases indicate that, without a solid regulatory framework to support it, and with tokenized stock products being highly tied to ecosystems with collapse risks like )FTX or Terra(, the promotion of stock tokenization will also be difficult to sustain.

Current issues: Liquidity breakdown makes it hard to attract market makers, compliance standards are lacking.

Even though the technology and regulatory environment have improved today, tokenization of stocks still faces two major structural bottlenecks:

On-chain and off-chain liquidity fracture: tokenized stocks and physical stock markets operate independently, making conversion difficult to execute in real-time and costly, which can easily lead to price decoupling. However, due to the difficulties in rapid circulation of arbitrage and hedging channels between the two markets, the challenges in risk management, and the lack of a unified and compliant settlement mechanism, it is currently also challenging to attract large liquidity from institutions such as market makers.

Compliance is still unclear: Unless there is a clear legal basis or regulatory agreement, such as Coinbase seeking approval from the SEC, the product parties dare not implement it, and both institutions and retail investors are also hesitant to enter the market recklessly. Additionally, the possibility of legal violations due to cross-jurisdictional circulation and the implementation of tax rules is also a significant challenge.

)Coinbase plans to launch tokenized stocks, becoming the blockchain version of Robinhood(

Possible solution: product innovation + compliance design advancement

Despite the numerous challenges, there are many potential solutions and experimental routes that are being explored.

In terms of technology and products:

Integrate on-chain DeFi applications, such as collateral lending or liquidity mining.

The foundation or DAO actively holds stock tokens to attract participation from the crypto community.

Introduce on-chain equity segmentation, combining gamification and other features.

On the regulatory and governance level:

Obtain licenses in leading jurisdictions such as Switzerland or Singapore.

Cooperating with licensed brokers or exchanges to custody stocks and issue tokens.

The next step for stock tokenization: waiting for compliance and finding PMF.

With the United States SEC’s attitude becoming more friendly and the acceleration of stablecoin legislation, along with various exchanges and brokerage platforms actively trying, tokenization of securities is expected to move from the gray area into the mainstream financial market. The implementation of regulations such as the European MiCA, Singapore MAS, and Switzerland DLT also provides large institutions with a legitimate space to explore innovation.

The new generation platform has begun to emphasize asset authenticity, on-chain transparency, and legal protection, while trying to optimize user experience. If a balance can be found between “product-market fit )PMF(” and “regulatory acceptability”, tokenization of stocks may no longer just be a speculative concept, but rather an important step in revolutionizing future financial infrastructure.

This article examines the three major models of U.S. stock tokenization from Robinhood and xStocks: How to break through the challenges of liquidity scarcity and regulatory pressure? Originally appeared in Chain News ABMedia.