On May 22, the crypto exchange Kraken announced a partnership with Backed Finance to launch "xStocks", a tokenized stock and ETF trading service covering over 50 US-listed stocks and ETFs including Apple, Tesla, and NVIDIA. In recent years, the integration of blockchain technology and traditional finance has been accelerating, with crypto exchanges becoming pioneers of this transformation. Are exchanges now pushing tokenized US stocks after previous efforts with tokenized dollars and government bonds?
Strategic Expansion
Founded in 2011, Kraken is one of the oldest global crypto exchanges, known for its security and compliance. In recent years, as crypto market competition intensifies, Kraken has been expanding its business boundaries. In 2024, Kraken acquired futures trading platform NinjaTrader and launched traditional trading services for over 11,000 US stocks and ETFs in some US states.
Tokenized stocks refer to converting traditional stock or ETF equity into digital tokens through blockchain technology, with each token representing partial ownership of the underlying asset. These tokens can be traded 24/7 on the blockchain, breaking through traditional stock market trading time and geographical restrictions. Kraken's xStocks is based on the Solana chain and plans to open to non-US customers, covering markets in Europe, Latin America, Africa, and Asia. Backed Finance is responsible for acquiring and custodying the underlying stocks, ensuring each token is 1:1 pegged to real assets, and token holders can redeem the cash value at any time.
This move is not an isolated incident. In 2025, global crypto exchanges are accelerating their penetration into traditional finance. For example, Bybit recently announced support for USDT trading of 78 global high-quality stock assets, covering tech giants (like Microsoft, Google), consumer goods companies (like Coca-Cola), and energy enterprises (like ExxonMobil). Users can trade using the stablecoin USDT, enjoying low barriers and high liquidity advantages. The industry trend indicates that tokenized assets are becoming a bridge between crypto exchanges and traditional finance.
FTX and Binance's Tokenized US Stock History
The concept of tokenized stocks is not new. As early as 2020, crypto exchanges began exploring this field, with FTX and Binance being the most representative. Founded in 2019, FTX was once the world's third-largest crypto exchange, known for innovative products. In 2020, FTX launched tokenized stock trading, allowing users to trade digital tokens of US stocks like Tesla and Apple. These tokens were provided by FTX's Swiss subsidiary Canco GmbH and pegged to stocks custodied by third-party brokers. FTX's tokenized stocks supported fractional trading, allowing users to purchase partial stocks for as low as $1, significantly lowering investment barriers. FTX also attempted to tokenize ETFs like the SPDR S&P 500 ETF (SPY).
However, FTX's tokenized stock business was limited by compliance issues and market volatility. In November 2022, FTX went bankrupt due to improper fund management and fraud scandals, terminating its tokenized stock business. Nevertheless, FTX's attempt proved the market demand for tokenized stocks, especially among emerging markets and young investors.
In 2021, Binance also launched tokenized stock trading, initially including stocks like Coinbase and Tesla. These tokens were settled in Binance's stablecoin BUSD, supported fractional trading, and aimed to provide a convenient US stock investment channel for global users. However, Binance's tokenized stock business quickly encountered regulatory obstacles. Financial regulators in multiple countries questioned its compliance, believing tokenized stocks might bypass traditional securities market regulatory frameworks. That same year, Binance announced the termination of this business and refocused on core crypto trading.
The experiences of FTX and Binance demonstrate that while tokenized stocks are technically feasible, they face challenges in compliance, asset custody, and market acceptance. Kraken's launch of xStocks clearly learns from predecessors' lessons, emphasizing collaboration with regulators and ensuring asset transparency and security through Backed Finance.
Why Exchanges Are Enthusiastic About Tokenized Stocks
Crypto exchanges are positioning themselves for tokenized stocks, driven by both technological advancements and market and strategic considerations. According to April 2025 data, US stocks' total market value is approximately $52 trillion, accounting for over 45% of global stock market size. Such a massive market share motivates exchanges to expand user groups and capture traditional financial markets. Crypto exchanges' user base primarily consists of young, high-risk-appetite investors, but traditional financial markets are far larger than crypto markets. Tokenized stocks provide exchanges an entry point into traditional finance, attracting traditional investors interested in stocks and ETFs. For instance, Kraken's xStocks targets non-US customers, precisely positioning itself for emerging markets with strong US stock demand but limited by traditional channels.
Moreover, the core advantages of blockchain technology lie in decentralization, transparency, and high efficiency. Tokenized stocks utilize blockchain to enable 24/7 trading, instant settlement, and low-cost operations, solving issues such as limited trading hours and high intermediary fees in traditional stock markets. Additionally, blockchain supports fractional trading, allowing small investors to participate in high-value asset investments, thereby enhancing financial inclusivity.
Against the backdrop of intensifying competition among crypto exchanges, tokenized stocks have become a tool for differentiated competition. Kraken's xStocks not only provides trading functions but also allows users to use tokens as collateral for DeFi protocols, enhancing asset liquidity and application scenarios. This cross-border integration offers users more diversified investment options and helps consolidate the ecosystem stickiness of exchanges.
Impact on Traditional Stock Exchanges
Tokenized stock businesses of exchanges like Kraken pose certain challenges to traditional stock exchanges (such as Nasdaq and NYSE) while also bringing opportunities for collaboration and transformation. Traditional stock exchanges typically limit trading hours to specific periods on workdays, and cross-border investments involve high transaction fees and settlement cycles. The 24/7 trading and instant settlement characteristics of tokenized stocks directly challenge the operational models of traditional exchanges. Especially in emerging markets, investors may be more inclined to acquire US stock positions through crypto exchanges rather than traditional brokers.
Facing the impact of blockchain technology, traditional exchanges are not without strategies. Institutions like Nasdaq have begun exploring blockchain applications in securities settlement and clearing. For example, Nasdaq has collaborated with R3 to develop an asset management platform based on the Corda blockchain. In the future, traditional exchanges may partner with crypto exchanges to launch their own tokenized products or provide more efficient trading services through technological upgrades.
The rise of tokenized stocks has prompted regulatory bodies to re-examine the compliance framework of blockchain finance. This provides traditional exchanges with opportunities to collaborate with regulators by establishing industry standards and maintaining market fairness and stability. For instance, recent enforcement actions by the US SEC against crypto exchanges have become more moderate, indicating a more open attitude towards blockchain technology innovation.
Summary
Kraken's xStocks, Bybit's USDT stock trading, and early attempts by FTX and Binance collectively outline the evolution trajectory of tokenized stocks. This trend is not only a product of blockchain technology and traditional finance integration but also a microcosm of global investment demands becoming more diverse and technology-driven. For investors, tokenized stocks offer more flexible and low-cost asset allocation methods; for exchanges, they are strategic weapons for market capture and differentiated competition; for traditional stock exchanges, they are both challenges and opportunities for technological upgrades and market expansion.
However, the popularization of tokenized stocks still faces multiple challenges in compliance, technology, and market education. Exchanges like Kraken need to find a balance between innovation and regulation, ensuring asset security and user trust. In the future, as blockchain technology matures and the regulatory environment becomes clearer, tokenized stocks are expected to become an important component of the global financial market.
