Are Tokenized Stocks the Next Big Thing? Or the Next Big Risk?

• Robinhood’s announcement of offering tokenized U.S. stocks for European users drew industry‑wide attention across traditional and cryptocurency markets. 

• This tokenized equity offering by Robinhood is available to trade 24 hours a day, five days a week, with zero commissions and includes dividend payouts. 

• Tokenized equities offer advantages that conventional markets cannot match: around‑the‑clock trading, lower fees, near‑instant settlement and compatibility with decentralised finance (DeFi) applications.  

• However, limited shareholder rights, patchy liquidity and fragmented regulation mean the asset class faces challenges before it can fully blossom. 

• With the US SEC signaling a friendly stance and Switzerland currently permitting tokenized securities and Abu Dhabi’s FSRA rolling out detailed rulebooks for security tokens, regulators are laying the foundation to allow the traditional equities to trade freely on the blockchain. 

On 30 June 2025, Robinhood dropped a financial bombshell that sent ripples through both the traditional finance and the cryptocurrency markets. The fintech giant made two announcements. Firstly, the launch of tokenized versions of over 200 popular US stocks and ETFs, instantly accessible to European users as blockchain-based tokens. Household names like Apple, Nvidia and Microsoft are now available for trading without any platform-related fees, around the clock. Secondly, they announced their own Ethereum-based layer 2 (L2) solution – the Robinhood Chain, due for launch in the near future.

The headline grabbing news catapulted Robinhood’s own stock price, pushing it up over 10% to record-breaking all-time high. Clearly, the market saw a massive opportunity. The air was thick with the scent of a new beginning in the crypto space, and the promise of untapped riches. The tokenized equity tokens offered by Robinhood can trade 24 hours a day, five days a week, with zero commissions and this offering includes dividend payouts as well. They are currently issued on the Arbitrum L2 but Robinhood plans to migrate them to its own L2 once it’s live.

These tokens are backed 1:1 by the stock each token represents. Robinhood’s special-purpose vehicle (SPV) holds the actual shares with a licensed broker-custodian with each token representing a pro-rata claim on those shares. Although holders do not receive voting power, these tokens make holders eligible to receive economic rights (price exposure and dividends).

On a side note, beyond public equities, Robinhood and few others are exploring tokenized exposure to private companies such as OpenAI and SpaceX. These offerings, while innovative, invite regulatory and legal concerns due to the lack of mandated disclosures and valuation opacity typically associated with private firms. Regulators are watching closely, as this could blur the line between retail investing and private placements which are usually reserved for accredited investors.

While Robinhood got into the spotlight, tokenized stocks were introduced by two other players the same day, just a few hours earlier. Kraken and Bybit announced the launch of xStocks on their respective platforms. xStocks, similar to Robinhood’s tokenized stocks offering, introduced tokenized versions of stocks of over 60 publicly listed US companies on the two centralised exchanges (CEXes) and on Solana’s decentralised finance (DeFi) protocols including the Jupiter DEX, Raydium and Kamino Finance.

However, one clear advantage for users of xStocks is that users can trade these 24/7. (as opposed to Robinhood’s current 24/5 limitation) Behind the scenes, both the CEXes lean on Backed Finance, a Swiss-regulated entity under the DLT Act and the Financial Market Infrastructure Act (FMIA), to keep everything above board. Then, there’s Securitize, which goes all-in as a US SEC-registered broker-dealer and FINRA-approved alternative trading system (ATS). The company mainly focuses on primary token issuance, secondary market trading, and compliance management. Securitize has roughly $38 billion under administration and operates as an end-to-end service provider linking primary issuance and secondary marketplaces. In June 2025, it even raised $47 million led by BlackRock.

Gemini, a US based crypto exchange and custodian bank, teamed up with Dinari to launch tokenized versions of Michael Saylor’s Strategy (formerly MicroStrategy) for EU investors. Dinari is registered with the US SEC as a transfer agent and operates as a FINRA-regulated broker-dealer. While it can issue tokenized securities, broader secondary trading access in the US remains limited until the SEC provides clearer regulatory guidance.

At the time of writing, over $402 million worth of stocks are tokenized. Of this, over $268.92 million is accounted for by the tokenized version of Exodus Movement Inc.’s Class A shares which have been tokenized by Securitize on Algorand. For the sector, monthly active addresses currently hover around the 37.9K mark with over 95% of them being on Solana following the launch of xStocks on the network. Meanwhile, the total number of holders of tokenized stocks has crossed the 48.6K mark.

Figure: The stock tokenization sector has grown % to over $402 million in the last one year.

Source: AMINA Bank, RWA.xyz (9 July 2025)

The tokenized stocks sector is slowly taking shape and things are moving at breakneck speed. Gemini is expanding its tokenized stock offerings beyond just Strategy to provide access to names like Apple, Amazon and Tesla. Robinhood is developing its Ethereum-based L2 to bring DeFi composability to its tokenized stock offerings.

Ondo Finance is also stepping up. It’s building a global platform for tokenized stocks, partnering with big names like the Solana Foundation and the US-based digital asset custodian BitGo. Their goal is to make a common standard for these tokens, so they can integrate across wallets, exchanges and DeFi applications. This push towards composability is crucial for scalable adoption and will be key to making the space less fragmented and more user-friendly. Ondo also announced their acquisition of Oasis Pro, including its SEC-registered broker-dealer, Alternative Trading System (ATS) and Transfer Agent (TA). This acquisition equips Ondo’s tokenization products with digital asset licenses available in the US.

Coinbase is waiting for the SEC’s green light (either a no-action letter or an exemptive regulatory relief) in order to roll out their own offering of tokenized equities for US customers. The same goes for Ondo Global Markets which is in development, is planning to offer over one thousand publicly listed equities with 24/7 trading for users anywhere in the world and is in dialogue with the SEC Crypto Task Force.

Regulators across the globe are beginning to lay real groundwork for tokenized securities. In the US, SEC Chair Paul Atkins recently signaled a shift in tone, stating that the agency will prioritise clear regulatory guidance to support tokenization efforts. Across the Atlantic, Europe’s DLT Pilot Regime is already live, giving authorised market participants a flexible testing ground for blockchain-based trading and settlement without needing full regulatory approval upfront.

Singapore is taking a more principle-based, tech-neutral approach. If a token represents a security under its Securities and Futures Act, it’s treated no differently than a traditional asset. Switzerland remains a step ahead, already recognising tokenized securities and allowing them to be directly recorded on blockchain ledgers. Meanwhile, the Financial Services Regulatory Authority (FSRA) in Abu Dhabi’s Global Market has published detailed frameworks and licensing regimes tailored specifically for security tokens. It’s clear that regulatory infrastructure is catching up and jurisdictions are quietly competing to become the go-to hubs for compliant tokenization.

Below is a table outlining the current competitive landscape within the tokenized stocks sector.

Table: Tokenized Stocks Key Players

Source: AMINA Bank

We see tokenized stocks as a true game-changer. By moving traditional share ownership on-chain, they open up markets to everyone from crypto natives to old-school investors.

The sector unlocks powerful use cases which have not been possible in the past. For example, it enables round-the-clock trading of these stocks. Trading never sleeps and is not bound to the limited market open hours of the stock market.  News breaks at any hour, and tokenized markets lets traders act immediately, not wait until the next business day. Additionally, the offering cuts through layers of middlemen and replaces the slow (T+2 days) settlement cycle with instant settlement. Fewer intermediaries mean lower fees and cleaner price discovery.

A huge factor of leverage could also be the ability to plug these tokenized stocks into DeFi. In addition to giving investors exposure to these stocks, they can be a lego block for DeFi strategies. For example, an investor holding tokenized Tesla stock could use it as collateral and borrow against it on a lending marketplace like Kamino Finance. These tokens can also be used to earn yield by contributing them to liquidity pools (LPs) on platforms like Jupiter or Raydium. Till now, this has been possible only for permissioned institutional players through protocols like Maple Finance. However, with big names like Robinhood, Kraken and Bybit now entering the space and bringing this product to retail users, it changes the game.

Despite the rapid improvement on these rails, limitations persist. Most token holders don’t get voting rights or legal ownership of the company. They get financial exposure, but not the full rights of shareholders. Liquidity is also patchy currently, especially on weekends. Traditional stock markets are closed and market makers are unable to hedge positions during the time. This causes price gaps and wide spreads. This undermines one of the value propositions of tokenization. Until liquidity improves, investors risk higher transaction costs through price variance and extended volatility compared to traditional stock markets.

While tokenization offers technical advantages, it’s not immune to risk. Smart contract vulnerabilities, platform hacks and operational failures remain a threat. Proof-of-reserves, third-party audits and strong operational controls are essential safeguards, which is yet to be an industry norm.

Additionally, users need to go through KYC to mint or redeem tokens. Others can only trade in secondary markets, which limits price stability. Even though the tokens can trade around the clock, price discrepancy may persist and provide arbitrate opportunities.

Regulations also vary by region. Europe has clearer rules, but the US is still figuring things out, which is why this currently isn’t available to retail investors in the US. Some platforms even block token transfers to avoid legal issues, reducing their usefulness in DeFi. This patchwork of regulations means your ability to buy, sell or even hold these tokens can change suddenly if authorities crack down. Investors could face sudden trading halts or even loss of access to their tokens depending on local laws.

As with any emerging asset class, investor education is critical. Retail users should understand who is issuing the token, what rights it confers and the risks involved. If the product’s structure or redemption terms are not transparent, it may not be suitable for retail participation.

Established institutions bring certain strengths to the table when it comes to tokenized stocks, especially those who value trust, reliability and regulatory clarity. They’ve spent decades building relationships with regulators and setting up systems to stay compliant across borders. This makes it easier for them to introduce tokenized products in a way that’s secure and legally sound. Additionally, reputable institutions provide clear transparency through audits and reporting (for example, maintaining adequate reserves and undergoing regular third-party proof-of-reserves checks) to reassure investors that their assets are fully accounted for. All these measures create a strong safety net of trust and compliance, allowing retail investors to participate in tokenized stocks with greater peace of mind.

For everyday users exploring this space, a familiar name can go a long way. Many people are still cautious about crypto, so platforms they already know and trust can offer a more comfortable entry point. These institutions also have the benefit of existing customer bases and resources, which helps them roll out new products more smoothly. For users, that can translate to a better experience right off the bat.

In a space that’s still finding its footing, there’s something reassuring about working with players who already understand the rules and know how to operate at scale.

Tokenized stocks are no longer just a niche idea. The narrative is steadily moving toward mainstream adoption. Regulators are starting to show more openness to this space and industry players are working together to create common standards that make tokenization easier to scale. The bigger goal is clear: let traditional stocks move easily between the traditional financial system and the blockchain.

In the coming months, developments from the US SEC and the implementation of a framework for the treatment of tokenized securities within the MiCA (Markets in Crypto-Assets) regulation in the EU will be pivotal in shaping the trajectory of tokenized stocks. Meanwhile, Asia-Pacific jurisdictions like Singapore and Hong Kong are positioning themselves as hubs for compliant innovation. If platforms can harmonize legal clarity, technical security and liquidity, tokenized stocks may well become a cornerstone of global financial infrastructure.

Investors and participants eager to explore this evolving space need to remember to ask the right questions, wait patiently for robust infrastructure developments and stick to trusted players who clearly demonstrate they know what they’re doing. Tokenized equities might be the next big thing in crypto. Yet without the guardrails of regulated, battle‑tested institutions, they could just as easily become the next big risk.

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Disclaimer – Research  

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