Stock Tokenization: The New Fusion of TradFi and Blockchain

Recently, many fintech companies and cryptocurrency exchanges have launched stock token businesses, attracting widespread attention from the market. This innovative financial product provides investors with a brand new way to trade stocks, which is worth exploring in depth.

Stock Token Innovation of a Financial Technology Company in the United States

A well-known financial technology company recently launched a highly anticipated stock token service in the EU market, bringing a new stock trading experience to European users.

This service allows users to buy and sell derivatives that track stock prices priced in USD, with automatic Euro conversion handled in the background, charging a 0.1% exchange fee.

The core mechanism of stock tokens lies in their unique custody and mapping methods. These tokens are price-tracking derivatives, with their underlying assets securely held by institutions licensed in the United States. The European branch responsible for issuing these contracts records them on the Blockchain. Due to the derivative nature of stock tokens, the corresponding securities can only be held in the company's account, and users cannot redeem them directly.

The company's stock tokens are offered as derivative contracts under the MiFID II( Markets in Financial Instruments Directive II) framework. An exchange previously acquired by the company holds an MFT( Multilateral Trading Facility) license, which complies with the EU's licensing requirements for companies providing derivative trading services. This means that the service is subject to relevant regulation in the EU, providing users with a certain level of compliance assurance. However, this service is currently only available in the EU and is not tradeable in the United States.

In terms of trading hours, the first phase of stock tokens will be available for trading five days a week, from Monday 02:00 to Saturday 02:00 Central European Time/DST.

For company actions involving ( such as dividends, bonuses, splits, etc. ), the company will act on behalf of the execution:

• Position Adjustment: For operations such as stock splits, reverse splits, stock code changes, or spin-offs, the number of stock tokens may be automatically adjusted in the account to reflect the changes in the underlying stocks.
• Cash Distribution: In the event of mergers, acquisitions, liquidation, or delisting, users may receive cash distributions denominated in Euros based on the event.
• Dividends: Cash dividends will be processed automatically. Users will receive dividends paid in euros, which will be displayed as cash distributions in the transaction history. Dividend payments do not incur exchange fees, but withholding tax may be applied depending on the region.

In terms of capital turnover, the funds obtained from selling stock tokens can be immediately used for trading and can be withdrawn on T+1 day.

The issuance of the company's stock tokens utilizes Blockchain technology, initially based on the Arbitrum Blockchain, with plans to migrate to a self-built Layer 2 Blockchain in the later stage. This indicates the company's commitment to leveraging Blockchain technology to enhance transaction efficiency and transparency.

As part of its broader cryptocurrency promotion plan, the company has, for the first time, achieved access to private equity through Blockchain technology, launching tokenized stocks of two well-known tech companies to European users. This milestone move is made possible by the more flexible regulatory environment in the EU, allowing ordinary investors to access the equity of these typically private companies that are usually only available to insiders and high-net-worth investors.

Open Design of a Cryptocurrency Exchange

Another well-known cryptocurrency exchange has launched stock tokens (xStocks) with a more open design philosophy.

xStocks is managed by a fintech company that purchases and holds real stocks or ETF assets, stored at a compliant third-party custodian. Each xStocks Token is 1:1 pegged to the underlying asset, and the custody process is strictly regulated to ensure asset safety and transparency. The official website emphasizes that the reserve proof mechanism of the fintech company is regularly verified through Chainlink to ensure the matching of tokens with actual assets.

xStocks is an SPL Token based on the Solana Blockchain, representing partial ownership of underlying stocks or ETFs. The tokenization process is implemented through smart contracts, with prices synchronized in real-time with traditional markets via Chainlink oracles. Users can transfer xStocks to Solana compatible wallets and use them for trading, liquidity mining, or collateral in decentralized finance (DeFi) protocols. The official website specifically states that xStocks can be redeemed at any time for the cash value of the underlying assets, with a fast and efficient settlement process.

xStocks supports fractional investing, with a minimum investment threshold as low as 1 dollar, suitable for retail investors. Tokenization eliminates the cumbersome processes of TradFi brokers, reducing the costs and delays of cross-border investments.

In terms of compliance, the exchange actively collaborates with financial technology companies and global regulators to ensure that xStocks complies with local laws and regulations. The official website states that the exchange implements strict KYC and AML processes, and all users must undergo identity verification. The issuance and trading of xStocks are governed by the regulatory framework of the financial technology company, and the specific terms can be found in the "Base Prospectus" on its official website.

xStocks is currently only open to non-US clients and does not support users from markets such as the US, Canada, the UK, the EU, and Australia. The target markets include parts of Europe (, Latin America, Africa, and Asia. The exchange holds a MiCA ) license for cryptocurrency market regulations ( in the EU, which supports its compliant operations in Europe and may lay the groundwork for future expansion of xStocks in certain regions of Europe.

xStocks supports 24/5 trading ) from Monday to Friday all day (, breaking through the limitations of the traditional US stock market from 9:30 AM to 4:00 PM ) Eastern Time (. The official website confirms that xStocks can be traded on the exchange platform or on the Solana chain through compatible wallets. During market closures ) on weekends and US holidays (, on-chain trading is still possible, with prices based on the last closing price provided by Chainlink oracles and market supply and demand, which may result in price fluctuations similar to "prediction markets." The exchange plans to achieve 7/24 trading in the future.

xStocks holders do not have the voting rights or participation rights in shareholder meetings that traditional shareholders do. Dividends are indirectly distributed through a token price adjustment mechanism, equivalent to airdropping tokens of equal value to users based on their holding ratios, ensuring the transmission of economic benefits. Other corporate actions ), such as stock splits and mergers (, are handled by the fintech company, and the number or value of tokens is adjusted accordingly to reflect changes in the underlying assets.

On-chain trading of xStocks supports instant settlement ) T+0 1928374656574839201, significantly improving efficiency compared to the T+2 settlement cycle of traditional markets. Participation in the DeFi ecosystem (, such as using it as collateral ), further enhances the flexibility of xStocks, but liquidity pool depth may be limited during market closures, so slippage risk should be taken into account.

xStocks is currently based on the Solana Blockchain and uses the SPL Token standard. Solana was chosen as the launch platform due to its high throughput, low transaction costs, and mature ecosystem. Exchanges and fintech companies plan to expand xStocks to other high-performance Blockchains in the future to enhance interoperability and market coverage.

xStocks is issued by a fintech company, initially listing 60 US stocks and ETFs, including several well-known technology companies and ETFs. The exchange will launch xStocks on the platform starting from June 30, 2025, and plans to continuously increase the variety of supported assets. xStocks is also tradable on other cryptocurrency exchanges and Solana DeFi platforms, expanding market coverage.

The issuance of xStocks is supported by multiple blockchain projects and DeFi protocols, forming the "xStocks Alliance", which provides liquidity, technology, and ecological integration for the tokens. The official website emphasizes that xStocks is not only a business expansion for exchanges but also a milestone in the integration of TradFi and blockchain.

The issuance of xStocks is dynamically adjusted and is linked to the purchase and redemption of underlying assets. Users can trade xStocks on the exchange platform using fiat currency, cryptocurrencies, or stablecoins, with an investment threshold as low as 1 dollar, making it suitable for retail investors worldwide.

Comparison and Insights of Two Modes

In comparison, fintech companies have better compliance and coverage among mainstream populations, and offer non-listed stocks; while cryptocurrency exchanges cover more regions and support on-chain transactions and DeFi protocols native to the blockchain, making them closer to the cryptocurrency ecosystem.

For startup teams, participating in the issuance of new stock token assets may not necessarily compete with these two large companies, but at present, there are still two types of opportunities:

1. Covering segmented groups or regions, similar to the logic of replacing traditional brokers, targeting regions and groups that traditional brokers cannot reach, but which can be accessed by cryptocurrencies.

2. Financial product innovation. After the stock tokens are included in the asset pool, the entrepreneurial team can offer new derivative assets and trading strategies to differentiate themselves from major exchanges, such as high leverage contracts, leveraged ETFs, etc.

Stock tokenization undoubtedly provides investors with more diverse options. However, as a new type of financial product, users still need to fully understand its mechanisms, risks, and relevant regulatory provisions before participating in trading. In the future, with the development of technology and the improvement of regulations, stock tokenization is expected to be more widely applied globally, bringing new vitality to the TradFi market.