Tokenization of Stocks: Opportunities and Challenges

The concept of tokenization of stocks began to emerge in 2017, but it has only recently gained market attention again. This article will introduce the development history of tokenized stocks, the current market situation, as well as the opportunities and challenges it faces.

The Development History of Tokenized Stocks

Tokenization of stocks originates from the concept of Security Token Offering (STO)(, which aims to digitize traditional securities rights and put them on the blockchain. Unlike unregulated ICOs, STO emphasizes compliance, but still faces numerous obstacles in its early stages.

After the rise of DeFi in 2020, some projects began to attempt to create synthetic assets linked to stock prices through smart contracts, such as Synthetix and Mirror Protocol. However, these projects ultimately failed to gain sufficient trading demand.

At the same time, some centralized exchanges also launched tokenized stock trading services, but quickly suspended them due to regulatory pressure. Subsequently, the development of this sector stagnated until the recent shift in the regulatory environment, which has led the market to refocus on this area and incorporate it into the category of RWA) real-world assets(.

![Crypto policies drive the US stock RWA narrative, interpreting the opportunities and challenges of tokenization stocks])https://img-cdn.gateio.im/webp-social/moments-fcb8221360c00c36b9bd15957a95f1fa.webp(

Current Overview of the RWA Stock Market

The current stock RWA market is still in its early stages, mainly dominated by US stocks. According to the data, the total issuance currently reaches $445 million, of which $430 million comes from EXOD, which is the stock token issued by Exodus Movement on the Algorand chain.

Exodus is the first publicly traded company in the United States to tokenize common stock, and its successful regulatory approval is of significant importance. However, EXOD serves only as an on-chain identifier for the stock, does not contain actual rights, and cannot be directly traded on-chain.

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Apart from EXOD, Backed Finance holds about $16 million in market share. The project allows users who meet KYC requirements to mint on-chain stock tokens by paying USDC. Backed's main assets include CSPX and coin, with liquidity primarily concentrated on the Gnosis and Base chains.

![Pro-crypto policies drive the RWA narrative in US stocks, interpreting the opportunities and challenges of tokenization of stocks])https://img-cdn.gateio.im/webp-social/moments-bace5857bea209ca4935e71a12a39ce2.webp(

Another project worth paying attention to is Ondo Finance, in its recently announced Ondo Global Markets strategy, tokenized stocks are one of the core trading targets.

![The pro-crypto policy promotes the narrative of RWA in US stocks, interpreting the opportunities and challenges of tokenization of stocks])https://img-cdn.gateio.im/webp-social/moments-989e5e24c9b94347235153dca2872816.webp(

Advantages and Challenges of Stock RWA

The potential advantages of stock RWA include:

1. 24/7 round-the-clock trading
2. Reduce the cost for non-U.S. users to acquire U.S. assets.
3. Financial innovation potential brought by composability

![The pro-crypto policy drives the US stock RWA narrative, interpreting the opportunities and challenges of tokenization stocks])https://img-cdn.gateio.im/webp-social/moments-13c9e9cc00922937d36cdd59174b20ad.webp(

However, there are still two major challenges:

1. The pace of regulatory policy advancement is uncertain.
2. The development of stablecoin adoption remains to be seen.

![The promotion of crypto policies drives the narrative of RWA in US stocks, interpreting the opportunities and challenges of tokenized stocks])https://img-cdn.gateio.im/webp-social/moments-c61b2d3ee3c58eaa373dcb0180e3fee3.webp(

Short-term Market Opportunities

1. Publicly listed companies can refer to the EXOD case to issue on-chain stock tokens and enhance the company's valuation.
2. The tokenized version of high-dividend US stocks may attract income-oriented DeFi protocols to adopt it, such as the Ethena configuration BUIDL case.

Overall, tokenization of stocks faces challenges, but with improvements in the regulatory environment and technological advancements, there is still significant growth potential in the future.

![The crypto policy promotes the narrative of RWA in the US stock market, interpreting the opportunities and challenges of tokenized stocks])https://img-cdn.gateio.im/webp-social/moments-90408e36c956b1901b89bca5562014ec.webp(