The Prospects and Challenges of STO and Stock Tokenization

Recently, Coinbase's relaunch of its stock tokenization program has sparked renewed interest in the industry regarding STO and stock tokenization. In this issue, we invite dForce founder, Ren Mingdao, to engage in an in-depth discussion on topics such as the value proposition of STO, the challenges it faces, and its interaction with DeFi.

Coinbase Stock Tokenization Plan

Coinbase tokenization of stocks is not a new thing. There were proposals as early as 2020, but they were shelved due to a harsh regulatory environment. In January of this year, the head of Base proposed deploying Coinbase Tokens on the Base chain. In February, the SEC dropped its lawsuit against Coinbase, reflecting the new government's friendly attitude towards the crypto industry. The timing aligns closely with the overall changes in the regulatory environment.

The Value Proposition of Stock Tokenization

The value proposition of stock tokenization mainly includes:

1. Improve settlement efficiency and reduce funding costs
2. Expand the capital pool, from regional markets to global markets
3. Stock equity expansion, from a simple shareholder certificate to one with functional use.

For example, Coinbase stock tokens can be used for staking on the Base chain, paying gas fees, etc., while Disney stock tokens can be used for ticket discounts, etc. This empowerment is key to the integration of STO with the native coin circle.

Challenges Faced by Stock Tokenization

1. The conflict between territorial regulation and global circulation
2. The balance between KYC requirements and non-permissiveness
3. Decoupling issues caused by insufficient liquidity
4. Issuer Credit Issues

Prospects for Interaction with DeFi

Stock tokens entering the DeFi ecosystem can bring more assets and liquidity to DeFi. Currently, the DeFi infrastructure is relatively mature and can directly accommodate these new assets. The issuers of stock tokenization may be the biggest beneficiaries, similar to stablecoin issuers.

Changes in the Policy Environment

Recently, there have been positive changes in the U.S. policy environment, but there are also some concerns:

1. The degree of favorable policies and the execution speed exceeded expectations.
2. Some measures are too closely tied to specific political figures.
3. Most measures are introduced in the form of executive orders, lacking long-term stability.
4. The boundary between public power and private interests is blurred, making it vulnerable to attacks.

The key in the future is whether these policies can truly be solidified into a legal framework.

Overall, STOs and stock tokenization still face many challenges, but the long-term development prospects are promising. Although there have been positive changes in the policy environment, there is still uncertainty that requires close attention to subsequent developments.