In June of this year, Robinhood announced it would offer European users tokenized US stocks and ETFs, providing a product service similar to OTC financial derivatives through contracts for difference (CFDs). In September, Nasdaq formally submitted a proposal to the SEC, hoping exchanges could publicly issue securities in token form, officially bringing the topic of US stock tokenization to the forefront. On October 29th, Ondo Finance, often referred to as the "BlackRock on the blockchain," announced that its core product, Ondo Global Markets (Ondo GM), had officially integrated with BNB Chain, introducing tokenized stocks and ETFs to the BNB ecosystem on a large scale for the first time, sparking a new wave of US stock tokenization. Amidst the RWA craze, why is stock tokenization a direction we must pay attention to? What is the significance of getting involved in the US stock tokenization market for intermediaries, institutions, and ordinary investors? Does buying tokenized stocks equal buying stocks themselves? What are the core differences? Where are the compliance boundaries for this type of product? ... CryptoShalu will systematically review some key issues regarding stock tokenization today and offer its perspective from the professional viewpoint of a Web3 lawyer. First, why does CryptoShalu believe that stock tokenization is currently one of the most important branches of the RWA narrative? As everyone can sense, the crypto world has been turbulent these past few months. After experiencing large-scale liquidations such as the 1011 incident, investors have gradually realized that DeFi now has a huge flaw: products are becoming increasingly complex, protocols are layered, and various lending, leverage, arbitrage, and contract structures are interdependent, trying to create as many possibilities as possible. However, any problem in any link will quickly spread to every layer, leading to a chain reaction of liquidations. The tricky part is that the market struggles to predict which layer will start to spiral out of control, leaving little time to react. Once a crisis occurs, overall liquidity dries up in a very short period. In this situation, funds already in DeFi are starting to seek out valuable assets that can weather economic cycles. RWA, as a tokenized product based on real-world assets, naturally meets these requirements. According to the latest data from rwa.xyz, as of today, on-chain RWA funds have exceeded $35.6 billion and continue to grow. The CryptoSalt team has been at the forefront of RWA's practical application, allowing them to directly perceive the market's temperature. However, our view remains consistent: RWA is not yet ready for its explosive growth. CryptoShalu believes that, **currently, there are not many assets that can be on-chain and have yield value.** This is due to multiple factors, including regulation, technology, non-standardization, and liquidity, many of which require top-down solutions. Therefore, many institutions now prefer to tokenize existing financial securities such as money market funds and bonds to test the waters, as these products already have clear rights and obligations structures and well-defined legal definitions within the framework of securities and company law, making them highly standardized and compliant "products." Stocks, on the other hand, are among the financial products with relatively high risk and return, satisfying investors' risk appetite while also being more easily incorporated into on-chain applications such as collateralization and lending in DeFi scenarios. Furthermore, mature stock markets have considerable liquidity, comprehensive and mature intermediary institutions, and the feasibility of large-scale allocation and instant trading. As for US stocks, given the objective reality of the dollar's hegemony, US stocks are undoubtedly the most core, mature, and liquid asset class globally. Especially the giants represented by the "Seven Sisters" of US stocks, their rise and fall affect financial investment throughout the US and even globally. Moreover, the US is at the forefront of the crypto industry, so the popularity of US stock tokenization is to be expected. II. So what exactly can stock tokenization achieve? What forms does it take? How do all parties profit? Is it compliant? Let's take US stocks as an example. If we define it precisely from the perspectives of anchoring logic and investor rights, US stock tokenization can be divided into several mainstream models. The narrowest definition of US stock tokenization is Nasdaq submitting a proposal to the SEC, requesting its approval for issuing securities in token form on the main market. It's important to clarify that this doesn't require issuing a new type of stock, but rather the ability to issue the same stock in two forms, the difference being whether or not blockchain technology is used to represent ownership and register it. The only difference is that the DTC (Depository Trust Company) will determine whether to use tokenization for settlement and clearing based on user choices, without affecting transaction speed. This is the official definition of tokenization in the US stock market. Given the content of this proposal, it's hard to say what it will actually change. It's like the same food delivery service changing from a blue-rider to a yellow-rider, the same price, the same merchant, the same electric scooter. For those who can't download the app (investors without identity, address, funds, etc.), they still can't order or receive the food. Driven by this "market demand," a number of broadly defined US stock tokenization platforms have emerged: For example, Robinhood offers users a tokenized form of Contracts for Difference (CFDs). Users select US-listed stocks or ETFs on the platform to purchase Stock Tokens, each token representing one share or unit of the underlying stock. For each contract signed, the platform purchases the corresponding US stock through its US broker, Alpaca. Another example is MSX, which recently gained popularity due to its points-based season plan. It also relies on Payment for Order Flow (PFOF), which packages and routes users' on-chain orders to off-chain market makers, enabling the purchase of US stocks at real-time synchronized prices. The goal is to allow holders of tokens to receive corresponding stock dividends. Both Robinhood and MSX are essentially financial derivatives, not actual stocks. While most users know, and CryptoStreet must reiterate, that purchasing tokens on these platforms does not grant actual shareholder rights, investors still flock to them hoping to experience the ups and downs of the US stock market and profit from its allure. III. Conclusion However, this broad tokenization of US stocks faces several long-standing and difficult-to-resolve problems. For example, due to insufficient participants and the KYC (Know Your Customer) requirement, on-chain trading volume is shallow, resulting in insufficient market liquidity. Consequently, when investors buy and sell tokens, price slippage may occur, meaning they may not be able to sell at the expected price. Meanwhile, the conversion from stocks to tokenized assets involves multiple intermediate processes and even multiple participants. High transaction fees and frictional costs associated with minting and redemption lead to poor arbitrage efficiency, easily creating a vicious cycle. These issues constituted typical pain points in the early stages of US stock tokenization. Recently, Ondo Finance seems to have proposed a solution to this problem. Firstly, regarding liquidity, Ondo's approach is to purchase a batch of real stocks from the traditional market and store them with a licensed brokerage or custodian bank. When a user places an order, an equivalent portion can be allocated from the real stock inventory, generating a corresponding token on the blockchain and providing it to the user instantly. This shortens the link between the token market and the US stock market, allowing arbitrageurs to enter with lower transaction costs, and making token price fluctuations less volatile, effectively solving some of the liquidity issues. CryptoShadow believes the core compliance challenges of tokenization in the US stock market lie in two aspects: When a trading platform pools investor funds to purchase underlying stocks and distributes profits or dividends in token form, it may essentially become a **collective investment tool**, which requires registration or exemption within the securities regulatory framework; Secondly, if tokens can be freely bought and sold on-chain and traded through platform matching, the platform may be considered an **"Alternative Trading System (ATS)"**, and must comply with corresponding brokerage, clearing, and disclosure requirements. These two regulatory determinations almost entirely determine whether tokenized stocks can "legally exist" within the existing legal system, and are the most carefully weighed aspects when designing the business and technical architecture of various platforms. So how did Ondo Finance achieve compliance? First, Ondo Finance acquired Oasis Pro, directly obtaining licenses including a Broker-Dealer license registered with the US SEC, an ATS (Alternative Trading System) license, and a Transfer Agent license. This means it can legally hold real shares, perform liquidation, custody, tokenization, and transfer registration, providing ample compliance justification. Second, Ondo Finance is backed by large institutional funds and a top-tier financial background team. It's often referred to as the "BlackRock on the blockchain" because Ondo's on-chain role is similar to BlackRock's role in traditional finance, and their size and investor backgrounds are also comparable. BlackRock is the world's largest asset management company, and one of its core values is issuing safe, transparent, and large-scale funds and fixed-income products, such as US Treasury ETFs and money market funds. Ondo Finance has been working to bring government bonds and cash products onto the blockchain through tokenization, including USDY (a yield-generating "on-chain dollar" with short-term US Treasury bonds and cash equivalents (bank deposits, etc.) as underlying assets) and OUSG (a tokenized short-term government bond fund with short-term US Treasury bond ETFs managed by BlackRock and a small amount of institutional bonds as underlying assets). Therefore, Ondo Finance has ample strength and reason to take the tokenization of US stocks to the next level. The emergence of US stock tokenization is an important signal of the gradual integration of crypto finance and traditional capital markets. It is not only a technological innovation but also a testing ground for regulation and the restructuring of financial infrastructure. In the short term, tokenized stocks are still in the exploratory stage, and compliance paths and market mechanisms are constantly being refined; but in the long run, whoever can find a balance between compliance and efficiency will have the opportunity to occupy the commanding heights in the next wave of asset tokenization. From the perspective of CryptoShalu, the traditional financial system generally remains resistant to stock tokenization. This resistance is understandable: the new model is too "disruptive," causing too much impact on the existing financial order, and the current regulatory framework is incapable of keeping up. Who will be held responsible if problems arise? However, from another perspective, stock tokenization does address certain pain points. From technological innovation to actual market feedback, it clearly responds to current real needs, so we believe the future of stock tokenization is still promising.
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