Deregulation drives the RWA narrative of US stocks: opportunities and challenges of tokenized stocks

Written by: @Web3_Mario

Abstract: As Trump's policies are being gradually fulfilled, attracting manufacturing back through tariffs, actively bursting the stock market bubble to force the Federal Reserve to lower interest rates, and promoting financial innovation and industrial development through deregulation policies, this combination of moves is substantially changing the market. The RRWA track under these favorable deregulation policies is increasingly attracting attention from the crypto industry. This article mainly introduces the opportunities and challenges of tokenized stocks.

<>of Tokenized Stocks Development History

In fact, tokenstocks are not a concept new concept 2017, at Security Token Offering (STO) have already begun. STO is a financing method in the cryptocurrency field, essentially digitizing and chaining the equity of traditional financial securities through blockchain technology to achieve asset tokenization. It combines the compliance of traditional securities with the efficiency of blockchain technology. As an important security category, tokenized stocks are the most notable application scenario in the STO field.

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In addition, the remaining market share of approximately $16M mainly belongs to a project called Backed Finance. It is a Swiss company that, through a compliant framework, allows KYC-compliant users to mint on-chain stock Tokens by paying USDC through its official primary market. After receiving crypto assets, Backed converts them to US dollars and purchases COIN stocks in the secondary market (with potential delays due to stock market operating hours). After successful purchase, the stocks are managed by a Swiss custodian bank, which then mints bSTOCK Token 1:1 and sends it to the user. The redemption process is the reverse. The reserve asset security is guaranteed by an audit company called Network Firm, which regularly publishes reserve proofs. On-chain investors can directly purchase such on-chain stock assets through DEXs like Balancer. Moreover, Backed does not provide ownership or any additional rights to stock Token holders, including voting rights. Only KYC-verified users can redeem USDC through the primary market.

In terms of issuance, Backed's adoption is primarily concentrated on CSPX and COIN assets, with the former having an issuance of around $10M and the latter around $3M. In terms of on-chain liquidity, it is mainly focused on Gnosis and Base chains, with bCSPX liquidity at about $6M and wbCOIN liquidity at about $1M. The trading volume is not very high. For example, the largest liquidity pool for bCSPX has a cumulative trading volume of about $3.8M and approximately 400 transactions since its deployment on February 21, 2025.

Another noteworthy development is the progress of Ondo Finance. With Ondo announcing its Ondo chain and Ondo Global Markets overall strategy on February 6, 2025, tokenized stocks are the core trading objects in Ondo Global Markets. Perhaps Ondo, with its broader TradFi resources and better technical background, can accelerate the development of this track, though this remains to be observed.

Opportunities and Challenges of Stock RWA

Let's explore the opportunities and challenges of stock RWA. Typically, the market believes stock RWA has the following three advantages:

• 24/7 Trading Platform: Due to blockchain's technical characteristics, it can operate around the clock. This allows tokenized stock trading to break free from traditional exchange trading hours and fully explore potential trading demands. Using Nasdaq as an example, while it has extended pre-market and after-hours trading, regular trading is still limited to weekdays. By developing a trading platform directly through blockchain, 24/7 trading can be achieved at a lower cost.
• Low-Cost Access to US Assets for Non-US Users: With the widespread adoption of payment stablecoins, non-US users can directly trade US assets using stablecoins without incurring cross-border and inter-bank transfer fees and time costs. For instance, a Chinese investor using Tiger Brokers to invest in US stocks would face approximately 0.1% cross-border remittance fees, with settlement typically taking 1-3 working days. On-chain trading can avoid these costs.
• Financial Innovation Potential through Composability: With its programmable nature, tokenized stocks can embrace the DeFi ecosystem, offering stronger on-chain financial innovation potential, such as on-chain lending scenarios.

However, the author believes that tokenized stocks currently face two areas of uncertainty:

• Regulatory Policy Advancement Speed: Based on EXOD and Backed cases, current regulatory policies cannot effectively resolve the "stock-token equity" issue, meaning tokenized stocks do not legally have the same rights as physical stocks, such as governance rights. This limits many trading scenarios, like company acquisitions through secondary markets. The compliant usage scenarios for tokenized stocks remain unclear, which somewhat hinders financial innovation. Its progress heavily depends on regulatory policy advancement, and considering the current Trump administration's core policy goal of manufacturing reshoring, the timeline may continue to be postponed.
• Stablecoin Adoption Development: Historically, the core target users of tokenized stocks are likely traditional, non-US US stock investors. For this group, the increasing adoption of stablecoins is worth noting and closely related to stablecoin policies in other countries. For Chinese investors, obtaining stablecoins through OTC markets involves a 0.3%~1% premium compared to official exchange channels, which is far higher than the cost of investing in US stocks through traditional channels.

Therefore, in the short term, the author believes stock RWA has the following two market opportunities:

For listed companies, they can issue on-chain stock Tokens following the EXOD case. Although there are not many actual usage scenarios in the short term, the potential financial innovation capability might encourage investors to give the company a higher valuation. For companies providing on-chain asset management services, this method can transform investors' identities into product users and convert their held stocks into the company's AUM, thereby enhancing the company's business growth potential.

For high-dividend tokenized US stocks, some yield-generating DeFi protocols may become potential users. As market sentiment reverses, most on-chain native real yield scenarios will see significantly decreased yields. Yield-generating DeFi protocols like Ethena, to improve overall yield and market competitiveness, need to continuously seek other real yield scenarios. Referencing Ethena's BUIDL allocation as an example. High-dividend stocks typically belong to mature industries with stable profit models, robust cash flow, consistent shareholder dividend distribution, low volatility, strong economic cycle resistance, and controllable investment risks. Therefore, introducing high-dividend blue-chip stocks might attract yield-generating DeFi protocols.