Tokenization of Stocks Wave: Reform of On-chain Capital Market

In the era where cryptocurrency and artificial intelligence intersect, financial tokenization is triggering a new wave. Several well-known companies are competing for market dominance through tokenized stocks, and this trend could have profound effects on global capital flows, trading efficiency, and market volatility.

Entry of Giants and Strategic Layout

tokenization stock expansion plan of a certain trading platform

A trading platform recently announced plans to support tokenization of over 1,000 U.S. stocks by the end of the year. The main features of this plan include:

• Round-the-clock trading: Achieve uninterrupted trading 24 hours a day, breaking through the time limitations of traditional markets.
• Fractional ownership: Lower the investment threshold, allowing more ordinary investors to participate in the stock market.
• Global Accessibility: Providing a more convenient investment channel for global investors.

Currently, this service is limited to the EU market, but the platform has announced the launch of an Arbitrum-based Layer 2 blockchain. This move not only expands the Ethereum ecosystem but also marks a further convergence of traditional financial companies towards blockchain technology.

However, this innovation has also sparked some controversy. For example, some have pointed out that these tokenized stocks are not equivalent to real stocks, especially for non-publicly traded companies. Furthermore, according to the platform's explanation, what users are actually purchasing are tokenized contracts, rather than actual stocks. This highlights the importance of clear communication to users by companies when promoting tokenized financial products.

tokenized stock layout of a certain exchange

Another well-known exchange has taken a different approach. It launched tokenized stock products on Solana in partnership with others, offering tokenized versions of over 60 U.S. stocks and ETFs, and is open to non-U.S. users.

The characteristics of these tokenized stocks include:

• Issued on the Solana blockchain: can be withdrawn to self-custody wallets and is compatible with DeFi protocols.
• Low investment threshold: Only 1 dollar is needed to participate in the investment.
• Asset flexibility: Can be used in DeFi protocols to earn yields or as collateral.

It is worth noting that although the exchange has its own Layer 2 network, it has chosen the Solana ecosystem in the field of tokenized stocks. The long-term effects of this strategic choice remain to be seen.

Other Participants

Other companies are also actively entering the tokenization of stocks field:

• A trading platform has reached a strategic agreement with its partners to launch tokenized US stocks and ETF products on its spot platform. These assets are 1:1 linked to real stocks, support Ethereum and Solana networks, and may enable on-chain dividend distribution in the future.

• Another exchange has launched its first tokenized stock and opened it up to EU users in partnership with collaborators. This product enables 24/7 trading from Monday to Friday and is fully on-chain, broadening the range of tradable assets while ensuring compliance.

Market Landscape and Historical Echoes

potential layout

As a leading company in the crypto space, a certain exchange, although not officially in the market yet, is worth paying attention to for its strategic layout. It is reported that the company is in discussions with regulatory authorities regarding the compliance issues of tokenization of stocks.

The company's advantages include:

• Powerful portfolio: Invested in multiple top DeFi protocols. If these protocols can be integrated into the tokenization of stocks business, it will greatly enhance its influence.
• Advanced technological infrastructure: its blockchain is moving towards a million TPS target, and transaction speed is expected to compete with Solana.

Although the company is usually not a market pioneer, it tends to launch well-developed products after thoroughly testing the market. This cautious strategy may lead to its success in the tokenization of stocks.

Compliance is key

The current tokenized stock model is fundamentally different from a certain "mirror synthetic asset" protocol that caused a market explosion in 2020. Both the trading platforms and exchanges mentioned above have adopted a more compliant and regulated approach, avoiding the risk of repeating past mistakes. With the entry of traditional players and leading companies in the crypto space, the scale of tokenized stocks is expected to far exceed that of the past.

The Transformation of On-Chain Capital

Analyses predict that by the end of 2025, the market value of tokenized stocks on-chain may exceed $20 billion, with even conservative estimates reaching $50 billion. If a trading platform fully launches its Layer 2 chain and puts all stock assets on-chain, just its user and managed funds could exceed $100 billion.

The financial infrastructure of this "super tokenized stock" will usher in a new stage of deep integration between traditional finance and blockchain. The future financial system will feature both high efficiency and transparency, as well as global accessibility. The U.S. market is in a leading position in this trend, and tokenized stocks will become an important component of the global Capital Market.

Compared to traditional methods, on-chain stocks have the ability to trade around the clock, with lower transaction costs and no longer reliant on intermediary channels. Especially in overseas markets, acquiring US stocks would typically require paying a high premium, whereas on-chain assets can provide access to US stock exposure with almost "zero threshold," creating a broad and inclusive capital channel.

In the short term, on-chain stocks are still unlikely to completely replace traditional stock markets, existing more as a complementary mechanism. In terms of market volatility, the on-chain market may be more stable due to deeper liquidity, but it may also experience significant fluctuations during unexpected events due to the lack of traditional circuit breaker mechanisms.

In traditional stock markets, weekends and circuit breakers provide a buffer for market sentiment. In contrast, the "always-open" structure of the crypto market may trigger emotional sell-offs in certain situations. However, it also attracts users who are dissatisfied with the delay mechanisms of traditional markets. The real-time trading and uninterrupted nature of on-chain markets are gradually becoming their main appeal.

Although the proportion of tokenized stocks in the entire financial market is still negligible, with the deepening layout of major platforms, its proportion may significantly increase in the next two to three years. It may even prompt traditional securities exchanges to build their own on-chain platforms, providing product forms that better meet regulatory requirements.

All of this not only brings new investment opportunities but also comes with higher risks. The financial market is entering a multi-layered integration phase between on-chain and traditional mechanisms. Tokenized stocks are no longer a conceptual product but an indispensable part of the real financial system.

Currently, there are projects that have gone live, such as tokenized stock products on a certain platform, with a market value of 2 million USD. Although there are only 103 on-chain holders and the trading volume is about 3600 USD, it is still in the early stages. However, it is noteworthy that, since the traditional market has not yet opened, the on-chain trading price of this product is higher than its real stock price, which may imply that the on-chain market has the potential for "pre-pricing."

This "on-chain price discovery" mechanism may become an important way for traditional and on-chain markets to collaborate in the future. With the continuous growth of tokenized stocks, the transformation of the on-chain capital market has only just begun.