Abstract: As Trump's policies are gradually realized, with tariffs attracting manufacturing back to the US, deliberately bursting the stock market bubble to force the Federal Reserve to lower interest rates and inject liquidity, and promoting financial innovation through deregulation to accelerate industrial development, this combination is genuinely transforming the market. Among these, the RWA (Real World Assets) sector, favored by deregulation, is increasingly gaining attention in the cryptocurrency industry. This article mainly introduces the opportunities and challenges of tokenized stocks.

Overview of the History of Tokenized Stocks

In fact, tokenized stocks are not a new concept. Attempts at STOs (Security Token Offerings) began in 2017. STO is a financing method in the cryptocurrency field, essentially digitizing and tokenizing the rights of traditional financial securities through blockchain technology. It combines the compliance of traditional securities with the efficiency of blockchain technology. As an important category of securities, tokenized stocks are the most attention-grabbing application scenario in the STO field.

Before the emergence of STOs, the mainstream financing method in the blockchain field was ICO (Initial Coin Offering). The rapid rise of ICOs mainly relied on the convenience of Ethereum smart contracts, but most projects issued tokens that did not represent real asset rights and lacked regulation, leading to frequent fraud and absconding.

In 2017, the US SEC (Securities and Exchange Commission) issued a statement on the DAO incident, pointing out that some tokens might be securities and should be regulated under the Securities Act of 1933. This was the starting point for the formal germination of the STO concept. In 2018, STO, as a concept of a "compliant ICO," gradually became popular and began to attract industry attention. However, due to lack of unified standards, poor secondary market liquidity, high compliance costs, and other reasons, the market developed slowly.

With the arrival of DeFi Summer in 2020, some projects began to attempt decentralized solutions, creating derivatives linked to stock prices through smart contracts, allowing on-chain investors to directly invest in the traditional stock market without complex KYC processes. This paradigm is usually called the synthetic asset model, which does not directly hold US stocks, and trading does not require trust in centralized institutions, bypassing expensive regulatory and legal costs. Representative projects include Synthetix and Terra's Mirror Protocol.

In these projects, market makers can mint on-chain synthetic US stocks by providing excess cryptocurrency collateral and provide market liquidity. Traders can directly trade these targets through secondary markets in DEX, obtaining price exposure to anchored stocks. Remember that at that time, the stock in the US market was still Tesla, not NVIDIA from the previous cycle. Therefore, most project slogans highlighted the selling point of directly trading TSLA on the chain.

Pro-Crypto Policies and the US Stock RWA Narrative: Opportunities and Challenges of Tokenized Stocks

However, from the final market development, the trading volume of on-chain synthetic US stocks has always been unsatisfactory. Taking sTSLA on Synthetix as an example, including the first-level market minting and redemption, its total cumulative on-chain transactions are only 798 times. Later, most projects announced that due to regulatory considerations, they would delist synthetic US stocks and turn to other business scenarios. However, the fundamental reason may be that they did not find the PMF (Product Market Fit) and could not establish a sustainable business model. The business logic of synthetic assets is based on the premise of a large on-chain trading demand, attracting market makers to mint assets in the first-level market and make markets in the second-level market to earn fees. Without such demand, market makers not only cannot earn profits through synthetic assets but also have to bear the risk exposure of shorting anchored US stocks brought by synthetic assets, thus further shrinking liquidity.

In addition to the synthetic asset model, some well-known CEXs are also trying to bring the ability to trade US stocks to Crypto traders through centralized custody models. This model involves third-party financial institutions or exchanges holding actual stocks and directly creating tradable targets in CEX. Typical examples are FTX and Binance. FTX launched tokenized stock trading services on October 29, 2020, in cooperation with the German financial company CM-Equity AG and Switzerland's Digital Assets AG, allowing users from non-US and restricted areas to trade tokens linked to US-listed company stocks, such as Facebook, Netflix, Tesla, Amazon, etc. In April 2021, Binance also began to provide tokenized stock trading services, with the first listed stock being Tesla (TSLA).

However, the regulatory environment at that time was not particularly friendly, and the core initiators were CEXs, which meant that they formed a direct competitive relationship with traditional stock trading platforms, such as Nasdaq, naturally facing considerable pressure. FTX's tokenized stock trading volume reached a historical high in the fourth quarter of 2021. The trading volume in October 2021 was $94 million, but after going bankrupt in November 2022, its tokenized stock trading service stopped. Binance also announced the suspension of tokenized stock trading services only three months after launching the business in July 2021 due to regulatory pressure.

After that, as the market entered a bearish phase, the development of this sector also fell into a state of stagnation. Until Trump's election, his deregulatory financial policies brought about a change in the regulatory environment, which also reignited market attention to tokenized stocks. However, at this time, it had a new name, RWA. This paradigm emphasizes the introduction of compliant structure design, allowing qualified issuers to issue tokens guaranteed by real-world assets 1:1 on the chain, and the creation, trading, redemption, and management of the underlying assets of the tokens are all strictly executed according to regulatory requirements.

Current Market Status of Stock RWA Let's introduce the current market status of stock RWA. Overall, the market is still in its early stages and still mainly focuses on US stocks. According to data from RWA.xyz, the total issuance of the current stock RWA market has reached $445.40 million. However, it is important to note that $429.84 million of the issuance is attributed to a single target, EXOD, which is the on-chain stock issued by Exodus Movement, Inc. This is a software company focusing on the development of self-custody cryptocurrency wallets, established in 2015 and headquartered in Nebraska, USA. The company's stock is listed and issued on the NYSE America, allowing users to migrate its common Class A shares to the Algorand blockchain for management. Users can directly view the price of this on-chain asset in the Exodus Wallet. The company's current market value is $1.5 billion.

The company has become the only one in the US to tokenize its common shares on the blockchain. However, it is important to note that the on-chain EXOD is only a digital identifier of its shares and does not include voting, governance, economic, or other rights. At the same time, this token cannot be directly traded and circulated on the chain.

This event has a certain symbolic significance, marking a clear change in the SEC's attitude towards on-chain stock assets. In fact, Exodus's attempt to issue on-chain shares was not smooth sailing. In May 2024, Exodus first submitted an application for the tokenization of common shares, but due to the SEC's regulatory policies at that time, the plan was initially rejected. However, after continuously improving the technical solution, compliance measures, and information disclosure in December 2024, Exodus finally obtained approval from the SEC and successfully completed the tokenization of common shares on the chain. This event also made the company's stock sought after in the market, reaching a historical high.

In addition, the remaining market share of about $16 million is mainly attributed to a project called Backed Finance. This is a Swiss company that allows users who meet KYC requirements to mint on-chain stock tokens by paying USDC through its official primary market. Backed exchanges the cryptocurrency for US dollars and buys COIN stocks in the secondary market (there may be some delays due to stock market opening hours). After the purchase is successful, the stocks are managed by a Swiss custodian bank, and then 1:1 mint bSTOCK tokens are issued to users. The redemption process is the opposite. The security of the reserve assets is guaranteed by an audit company called Network Firm, which regularly issues proof of reserves. On-chain investors can directly purchase such on-chain stock assets through DEXs like Balancer. In addition, Backed does not provide stock token holders with ownership or any additional rights to the underlying assets, including voting rights. Only users who have passed KYC can redeem USDC through the primary market.

In terms of issuance, Backed's adoption is mainly focused on CSPX and COIN, with the former's issuance being about $10 million and the latter being about $3 million. In terms of on-chain liquidity, it is mainly concentrated on the Gnosis and Base chains, with bCSPX's liquidity being about $6 million and wbCOIN's liquidity being about $1 million. In terms of trading volume, it is not very high. Taking the largest liquidity pool of bCSPX as an example, since its deployment on February 21, 2025, the cumulative trading volume is about $3.8 million, and the cumulative number of transactions is about 400 times.

Another trend worth noting is the progress of Ondo Finance. With Ondo announcing its Ondo chain and Ondo Global Markets overall strategy on February 6, 2025, tokenized stocks are the core trading targets in its Ondo Global Markets. Ondo, which may have broader traditional financial resources and better technical background, can accelerate the development of this sector, but it still needs to be observed.

Opportunities and Challenges of Stock RWA Next, let's explore the opportunities and challenges of stock RWA. Generally, the market believes that stock RWA has the following three advantages:

1. 24/7 Trading Platform: Due to the technical characteristics of blockchain, it has the ability to operate around the clock. This allows the trading of tokenized stocks to break free from the trading time restrictions of traditional exchanges, fully exploring potential trading demand. Taking Nasdaq as an example, although it has now achieved 24-hour trading service capabilities through extended pre-market and after-market trading, regular trading time is only limited to weekdays. If a trading platform is directly developed through blockchain, it can achieve 24-hour trading at a lower cost.

2. Low-cost acquisition of US assets for non-US users: With the large-scale adoption of payment stablecoins, non-US users can directly use stablecoins to trade US assets without bearing the transaction cost and time cost brought by cross-border and cross-bank funds. Suppose a Chinese investor invests in US stocks through Tiger Brokers. Without considering the exchange fee, the cross-border remittance fee is about 0.1%, and the settlement of cross-border remittance usually takes 1-3 working days. If trading is conducted through the chain, these two costs can be avoided.

3. Financial innovation potential brought by composability: With programmable characteristics, tokenized stocks will embrace the DeFi ecosystem, giving them stronger on-chain financial innovation potential. For example, on-chain lending scenarios.

However, the author believes that tokenized stocks still face two uncertainties:

1. The pace of regulatory policy advancement: According to the cases of EXOD and Backed, we can know that the current regulatory policies cannot well solve the "same rights for stocks and tokens" issue, that is, purchasing tokenized stocks and physical stocks have the same rights at the legal level, such as governance rights. This restricts many trading scenarios, such as company mergers and acquisitions through the secondary market. And the compliant use scenarios for tokenized stocks are not clear, which to some extent also hinders the pace of financial innovation. Therefore, its progress is very dependent on the pace of regulatory policy advancement. Considering that the core policy goals of the current Trump administration are still in the stage of manufacturing return, the timetable may continue to be postponed.

2. The development of stablecoin adoption: Looking at the past development, the core target users of tokenized stocks are probably not native cryptocurrency users but traditional, non-US US stock investors. For this group, whether the adoption of stablecoins is increasing is also a matter of concern, which will be closely related to the stablecoin policies of other countries. For example, for Chinese investors, compared to the official channel exchange, obtaining stablecoins through the OTC market requires a premium of about 0.3%-1%, which is much higher than the cost of investing in US stocks through traditional channels.

Therefore, in summary, in the short term, the author believes that stock RWA has the following two market opportunities:

1. For listed companies, they can refer to the EXOD case and issue on-chain stock tokens. Although there are not many actual use scenarios in the short term, at least the potential financial innovation ability can make investors willing to give the company a higher valuation. For example, for companies that can provide on-chain asset management services, they can use this method to transform investors' identities into product users and transform investors' holdings into the company's AUM, thereby enhancing the company's business growth potential.

2. For tokenized high-dividend US stocks, some yield-type DeFi protocols will become potential users. With the reversal of market sentiment, the yield of most native real income scenarios on the chain will significantly decrease. Yield-type DeFi protocols like Ethena, to improve overall yield to enhance market competitiveness, need to continuously find other real income scenarios. Specifically, refer to Ethena's allocation of BUIDL. High-dividend stocks are usually in mature industries, with stable profit models, abundant cash flow, and the ability to continue distributing profits to shareholders. They also have low volatility and strong resistance to economic cycles, with relatively controllable investment risks. Therefore, if some high-dividend blue-chip stocks can be launched, they may be adopted by yield-type DeFi protocols.