Tokenised stocks are emerging as a powerful financial innovation, bringing the benefits of blockchain, such as global accessibility, round-the-clock trading, and DeFi integration, to traditional equities, while also introducing fresh challenges around regulation, liquidity, and shareholder rights.
Introduction
Tokenised stocks are blockchain-based digital assets that represent or mirror shares of real-world companies. In essence, they allow investors to gain exposure to traditional equities through crypto tokens, which can be bought, sold, and held on blockchain networks. This innovative crossover between crypto and stocks has recently gained traction, with major platforms beginning to offer tokenised versions of popular securities.
For instance, in mid-2025 Robinhood announced stock tokens for European customers, enabling access to 200+ US stocks and ETFs with zero commissions and 24/5 trading availability. Likewise, Backed Finance partnered with exchanges like Kraken and Bybit to launch xStocks, offering on-chain trading of over 60 US blue-chip stocks (like Apple, Tesla, and Amazon) backed 1:1 by real shares. These developments underscore the growing belief that tokenisation could transform how people invest, making markets more accessible, efficient, and around-the-clock.
At the same time, they highlight new uncertainties in regulation and investor protections. In this article, we explore the key benefits and drawbacks of tokenised stocks on blockchain.
Pros: Global accessibility & DeFi integration
Global accessibility & lower KYC requirement
One of the most touted advantages of tokenised stocks is greater global accessibility. By putting equities on public blockchains, companies can offer stock exposure to investors beyond the traditional geographic limits of stock exchanges. For example, Robinhood recently rolled out tokenised US stocks on Arbitrum for customers across 30 European countries. This means a user in the EU can buy shares of US companies like Apple or Tesla via tokens, even if they don’t have access to a US brokerage account. These platforms often have lower KYC (Know Your Customer) requirements, especially when compared to traditional brokerages. Some tokenised stocks are transferable ERC-20 tokens; as we will introduce in the next section, these tokens can be traded on-chain through a decentralised exchange without any KYC requirements.
Equally important is the improved user experience. Platforms like Robinhood are integrating tokenised stocks into familiar, user-friendly interfaces, lowering the barrier to entry for non-crypto users. Notably, Robinhood’s app does not require managing a separate crypto wallet or seed phrase to trade these stock tokens. Users can gain blockchain-based stock exposure with the same ease as using a traditional brokerage app. By bypassing regional limitations and technical hassles, tokenised stocks can open up equity markets to a much wider audience.
24/7 trading and DeFi integration
Traditional stock markets keep limited hours. Tokenised stocks, by contrast, have the potential to be traded around the clock, 24/7, much like cryptocurrencies. Already, some offerings like xStocks and Robinhood’s tokens are available nearly all the time (initially 24/5 on weekdays).
Beyond just extended hours, tokenised equities can potentially plug into the decentralised finance (DeFi) ecosystem, adding composability and new financial use cases. Once stocks exist as on-chain tokens, they become programmable money Legos.
A particularly vivid example of programmable finance comes from Backed Finance. The protocol submits orders to partner brokers to acquire real-world stocks, then mints corresponding bSTOCK tokens — unrestricted ERC-20 tokens. These bSTOCK tokens can be freely traded or added to DeFi liquidity pools. Retail investors can directly purchase bSTOCK or wbSTOCK on-chain and provide liquidity in AMMs. For instance, users have created LPs pairing bSTOCK tokens with stablecoins across DeFi platforms such as Gnosis’s Balancer and Swapr, Base’s Aerodrome, and Avalanche’s Pharaoh.
As of now, total liquidity (TVL) across these pools nears $8 million, with an average APY as high as 163%. While the current scale is still relatively small, this demonstrates how tokenised equities can become yield-generating assets in the DeFi economy, highlighting the programmable nature and economic utility of on-chain stocks.
Risk diversification
Whether it can be exchanged for real stocks or just exposure, tokenised stocks can bring investors underlying assets with low correlation with the crypto market. Considering that the US stock market not only provides stocks, but also ETFs that include other non-equity exposures, such as GLD (gold exposure), TLT (T-bonds exposure), etc. As shown in the figure below, the correlation between GLD (Portfolio 3) and IBIT is only 0.07, while the correlation between QQQ (Portfolio 2) and IBIT is only 0.57, and the correlation between TLT (Portfolio 1) and IBIT is -0.79.
Low correlation and negative correlation mean that investors can achieve portfolio diversification by combining the exposures of these underlying assets, thereby avoiding heavy losses in a market crash due to over-concentration of investment, which was previously difficult to achieve.
New strategies
Similarly, some strategies that were previously difficult to operate in the crypto market have become available, thanks to the multiple exposures brought by tokenised stocks. For example, cross-assets long-short trading—a strategy that could only be executed in traditional markets before—can now be gradually implemented in the crypto market. In addition, in theory, some strategies that combine the crypto market with the traditional market can also be executed in the crypto market at a relatively low cost.
For example, looking for arbitrage opportunities in BTC, BITO and IBIT options, just like SPY dispersion trading. Crypto institutions usually choose to regularly sell covered call options and cash-secured put options for medium- and long-term fund management, realising the function of "buying BTC at a low level, selling BTC at a high level, and getting additional income at the same time", and this systematic options selling behaviour is quite common in the crypto market. In the US stock market, retail investors typically use options as leverage tools and are willing to pay a relatively high premium for this purpose.
Therefore, market makers usually hold more positive gamma in BTC options and more negative gamma in IBIT options. This means that once an event occurs, the hedging behaviour of market makers will stabilise the price of BTC, but will increase the price volatility of IBIT, which will bring trading opportunities. When owning tokenised stocks and their derivatives, investors can easily arbitrage on a single exchange, enjoy the capital efficiency advantages brought by combined margin, and eliminate cross-exchange risks—a feature not previously available when executing similar strategies.
Cons 1: Not real shares (Yet) – Lack of shareholder rights
A critical downside of today’s tokenised stocks is that they typically do not confer the same rights as owning an actual share. In most implementations, the tokens are essentially synthetic derivatives of stocks, not the stocks themselves. For instance, Robinhood’s tokens are considered derivatives under EU regulations – each token is backed by a real share held by a licensed broker or special entity, but the token holder doesn’t directly own that share. Likewise, Backed Finance’s xStocks on Solana are backed 1:1 by shares held in a special purpose vehicle (SPV) in Liechtenstein. The SPV or custodian holds the actual stocks, and the on-chain token is just a claim on that underlying asset.
Because of this structure, token holders lack standard shareholder rights such as voting in corporate meetings or influencing management, and in some cases, may not even automatically receive dividends (unless the issuer chooses to pass them through). Critics point out that holding a tokenised equity is “just a synthetic representation of a share… and does not confer any shareholder rights and protections” that come with true ownership.
An illustrative example is Robinhood’s venture into tokenising private companies, such as SpaceX and OpenAI. These tokens gave investors price exposure to those firms, but no equity rights, since the companies themselves did not authorise or recognise these tokens. OpenAI, in fact, publicly denounced Robinhood’s offering of tokens tied to its stock as unauthorised and potentially illegal.
Cons 2: Poor liquidity
The liquidity risk of tokenised stocks may be more serious than that of altcoins to some extent. Since the liquidity of tokenised stocks mainly depends on the bridges from the US stock market, and the 7*24-hour trading mechanism is adopted in unison with the crypto market, it means that during the period when US stocks are not traded, the price of tokenised stocks is likely to experience "unexpected fluctuations" and there is a significant risk of price manipulation, which will cause substantial losses to investors.
At the same time, due to the additional price and time costs incurred by the bridge, the transaction cost of tokenised stocks is higher than that of trading in the traditional market, and these costs are likely to be difficult to improve in the short term.
Due to the liquidity issues caused by trading costs, tokenised stocks can only attract investors who are relatively insensitive to transaction costs, such as market makers who want to gain exposure outside regular trading hours to hedge against potential price volatility risks. However, for most retail investors, trading costs are likely to lead them to choose investing directly in the US stock market through brokers.
Cons 3: Legal grey zones and regulatory uncertainty
The regulatory status of tokenised stocks is, at best, uncertain and, at worst, potentially illegal. These products operate in a legal grey area in many jurisdictions. Robinhood’s tokenised US stocks are currently offered only in Europe (EU) under the oversight of the Bank of Lithuania, precisely because the regulatory situation in the US is unclear. US regulators could determine that such offerings violate securities laws or exchange regulations, especially if they circumvent existing rules. The concern is that tokenised stock platforms might be operating like unregistered exchanges or brokerages.
Another particularly sensitive issue is the tokenisation of private stocks (pre-IPO companies). As noted, Robinhood’s attempt to sell tokens tracking private firms, such as OpenAI, essentially does an “end run” around the disclosure and transparency rules that govern public listings. Normally, companies go public via IPO to raise capital, which triggers strict requirements for financial disclosures and investor protections. If tokenisation lets companies raise funds from the public without an IPO – and without those disclosures – it poses a serious regulatory challenge. Why would a company endure the costly IPO process if it could tap retail investors via tokenised shares?
Overall, until laws catch up, tokenised stock providers walk a regulatory tightrope. Even if the current environment (e.g. a more crypto-friendly SEC stance under certain leadership) seems permissive, these products must still comply with existing securities laws.