How to make the US stock market great again?

The stock market no longer waits for the bell to ring, and investing no longer requires brokerage permission.

Written by: 1912212.eth, Foresight News

Investing in US stocks is betting on the fate of the United States. If you invested $10,000 in the S&P 500 index in 2002, it would now have grown to $85,900. If that $10,000 was invested in the Nasdaq index, you could have received a return of $114,900.

As the largest securities market in the world, the US stock market rarely disappoints its investors. However, there are still too many countries and regions where investors are unable to access such assets, missing out on wealth.

What would happen if purchasing such assets no longer required an account, and was not limited by location and trading hours? With just a smartphone and a balance in a crypto wallet, one can buy "stocks" of American stock giants anytime and anywhere. This is no longer some fictional scenario, but rather the real transformation brought by "tokenization of US stocks."

In the next era, the stock market will no longer wait for the bell to ring, and investing will no longer require brokerage orders.

Tokenization is, in simple terms, the process of converting real-world assets into programmable and tradable digital tokens. These tokens are based on blockchain technology and typically comply with ERC-20 or similar standards, ensuring transparency and security. Tokenized U.S. Stocks refer to mapping or anchoring the stocks of U.S. listed companies (such as Apple, Tesla, etc.) onto the blockchain in the form of tokens, allowing them to be traded, transferred, and held on-chain like cryptocurrencies.

In short, in the world of blockchain, "replicating" a traditional stock means turning it into a "on-chain asset." For example, a stock worth tens of thousands of dollars can be fragmented into thousands of small units, allowing ordinary investors to participate with a low threshold. The advantages of tokenization include 24/7 trading, reduced intermediary costs, and enhanced liquidity, but it also faces regulatory uncertainty and technical risks.

For investors, the tokenization of US stocks lowers the investment threshold. For companies, the motivation to explore tokenization stems from multiple factors. The liquidity bottlenecks of traditional financial markets are becoming increasingly apparent, especially during non-trading hours. Additionally, institutional investors like BlackRock and JPMorgan are viewing tokenization as a tool to reduce financing costs. The improvement of the regulatory environment provides policy support for this trend.

So why is the wave of tokenization flooding into the US stock market?

The US stock market has unique advantages that other assets do not possess. Firstly, as the largest stock market in the world, the total market capitalization of US stocks is expected to reach between $52 trillion and $59 trillion by 2025, a scale that far exceeds that of stock markets in other countries or regions. The total market capitalization of global stock markets is approximately $124 trillion, with US stocks accounting for over 40%.

High return rates are another key factor, with the S&P Index recently reaching a historical high of $6336. The average annual return of the S&P 500 Index since 1957 is about 10.4% (approximately 6.5% adjusted for inflation), while the average annual return over the past 20 years is 10.364%, and over the past 30 years it is 9%. The barriers to trading U.S. stocks from non-U.S. regions are relatively high, as traditional investments require opening a brokerage account, meeting minimum investment amounts, adhering to trading hours (only weekdays from 9:30 AM to 4:00 PM Eastern Time), and dealing with cross-border regulatory and tax complexities. This process is especially cumbersome and costly for overseas investors.

The Tide is Rising

Retail investors are flooding into tokenized US stocks to bypass thresholds and benefit from the wealth effect. So what about the actions of institutions? Cryptocurrency exchanges, on-chain protocols, and online brokerages are all gearing up.

On May 22, the cryptocurrency exchange Kraken partnered with Backed Finance to launch a tokenized stock and ETF trading service called "xStocks", covering over 50 U.S.-listed stocks and ETFs, including Apple, Tesla, and Nvidia.

Another cryptocurrency exchange, Bybit, has chosen to collaborate with Swarm to enter the U.S. stock market. It is noteworthy that Kraken and Bybit themselves do not issue stock tokens but choose to enter the market through partnerships with other third parties. The ones that truly issue stock tokens include Backed Finance and Securitize. The former collaborates with protocols like Uniswap, leveraging MiFiD and Swiss DLT regulations to offer freely transferable tokenized stocks that support on-chain trading. Securitize collaborates with well-known institutions such as BlackRock and VanEck to provide end-to-end tokenization services.

However, the highly popular and closely watched tokenization in the crypto space is by the blockchain organization platform Ondo Finance and the well-known American brokerage Robinhood.

Ondo Finance is an institutional-grade platform focused on tokenizing traditional financial assets and introducing them to the blockchain. It is currently the most well-known project with issued tokens in the RWA sector, boasting a comprehensive product line. Ondo's flagship product USDY is a tokenized U.S. Treasury bond, with a total TVL reaching $1.39 billion. However, the market seems to be lukewarm, and its token price has steadily declined from $2 to around $0.7, where it has been oscillating for a long time.

The wave of tokenization in US stocks is surging, and Ondo couldn't sit still. Since the beginning of July, it first partnered with Pantera Capital to plan a $250 million investment to promote RWA tokenization. Then, on July 4, it acquired Oasis Pro, a broker regulated by the SEC, to obtain a range of licenses for US securities. Ondo also plans to launch tokenized stock trading in the coming months.

In just one month, Ondo has become particularly aggressive on the path of tokenization in the US stock market.

On July 10, Ondo once again acquired Strangelove to accelerate the development of its full-stack RWA platform. Recently, it also initiated a global market alliance, collaborating with public chains, DEXs, wallets, data service providers, cross-chain protocols, DeFi, and other products to unify industry standards.

It is foreseeable that after launching tokenized US stocks, Ondo will leverage its strong resource integration capabilities to push its presence into every corner of the crypto market, making it easy for crypto players to purchase tokenized US stocks.

Robinhood has also personally entered the field of tokenizing US stocks, becoming the first publicly listed brokerage to take this step.

This player, which disrupts the traditional brokerage industry with a zero-commission trading model, attracts a large number of young investors, especially millennials, with its low threshold and user-friendly interface, with an average user age of 35. There are 25.8 million funded accounts, with total funds under custody of 221 billion USD.

In June of this year, Robinhood launched over 200 on-chain stock tokens, even introducing tokenized equity for OpenAI and SpaceX, with each eligible user receiving 5 euros worth of OpenAI tokens.

Robinhood founder Tenev stated directly that the fundamental problem of the private equity market is that the best companies have too many options and will not actively consider retail investors, leading to the "adverse selection problem." The key innovation of tokenization is that "it can work without being chosen to join by tokenized companies," which is precisely the breakthrough that Robinhood can drive.

On July 21, design software giant Figma revised its IPO filing S-1. In the new document, in addition to determining the IPO price range, a significant difference from the S-1 submitted at the beginning of the month is the explicit statement that the company has officially authorized the establishment of a new class of "blockchain common stock." This grants the company's board the power to issue shares in the future in the form of blockchain tokens. In a sense, institutions are reaching potential investors from around the world through a borderless blockchain platform, gaining more potential buy orders.

In the first half of 2025, on-chain tokenization of US stocks has shifted from concept to reality. According to data from rwa.xyz, its total TVL has risen to 530 million USD, with the number of monthly active addresses skyrocketing to 70,000.

Tokenization is moving from pure crypto to traditional finance: no longer a speculative tool, but a bridge to enhance efficiency.

The Savage Past

The current wave of tokenization in the US stock market, which is at its peak, is not actually a new phenomenon; its past is the price paid for innovation.

The early attempts at tokenizing US stocks can be traced back to the experimental explorations of decentralized protocols in the last cycle. Synthetix is one of the earliest platforms to support trading of synthetic assets for US stocks, allowing users to hold tokens like sTSLA and sAAPL on-chain to simulate the price performance of US stocks. However, these assets lack the backing of real stocks and rely solely on collateral mechanisms and oracle price feeds, leading to weak liquidity and the risk of decoupling. According to statistics, the cumulative trading volume of sTSLA on the Synthetix platform is less than 800 transactions, and ultimately, most projects have transformed due to regulatory pressure and unsustainable business models.

Although there are no shareholder rights, it has opened the door for mapping crypto assets to real-world assets. This model provides pricing through an oracle, bypassing traditional custodial mechanisms, and offers a reference paradigm for subsequent players.

At the same time, centralized exchanges became the main drivers of the early tokenization of US stocks. In 2020, FTX partnered with the German licensed broker CM-Equity to launch tokenized US stocks such as Tesla and Apple, allowing non-US users to trade 24 hours a day, backed by real stocks held in custody. In 2021, Binance followed suit by launching "stock tokens," allowing users to trade assets like Tesla with zero commission using USDT.

However, this type of model is essentially an internal derivative of CEX, lacking on-chain transparency and regulatory endorsement, which quickly led to warnings from regulators in multiple countries. FTX's tokenized stock trading volume reached $94 million in the fourth quarter of 2021, but with the platform's bankruptcy in 2022, related services came to a sudden halt; Binance, on the other hand, removed products after only three months of operation due to regulatory pressure.

The ideal is abundant, but reality is stark. The FTX collapse in 2022 also became a watershed moment for tokenization in the US stock market, shifting the market from "barbaric growth" to "compliance reconstruction."

These cases expose the core contradictions of early tokenization in the U.S. stock market: the imbalance among technical feasibility, compliance costs, and market demand. However, these practices have laid the groundwork for today's more compliant and structured tokenization attempts, pushing the market to recognize the potential of asset on-chain.

The true on-chain US stock assets have been brought back to the agenda after 2022, with the rise of the RWA concept. The representatives of this round include projects like Backed Finance, which generally adopt relatively friendly jurisdictions such as Switzerland and Liechtenstein, using the method of "1:1 custody + verifiable reserves + on-chain issuance" to map real US stock securities into tokens of standards like ERC-20, possessing stronger compliance and traceability.

In 2024, Exodus Movement became the first publicly traded company in the United States to tokenize common stock, issuing EXOD tokens through the Algorand blockchain that allows users to convert on-chain tokens to New York Stock Exchange stocks on a 1:1 basis. This marks a shift in the SEC's attitude towards on-chain stocks, but the tokens only support price tracking and do not include shareholder rights such as voting.

Challenges and Risks

A field full of opportunities always comes with risks. The liquidity of on-chain US stocks is the real big challenge.

On July 3, the price of the token AAPLX tracking Apple surged to $236.72, a 12% premium over the then-current stock trading price. Similarly, the token tracking Amazon soared to $891.58 on July 5, four times the previous trading day's closing price for the stock. A more extreme situation occurred on the peer-to-peer cryptocurrency trading platform Jupiter. Blockchain data shows that earlier on July 3, an unidentified user attempted to buy about $500 worth of Amazon token AMZNX, briefly pushing its price up to $23781.22, which is over 100 times the previous day's closing price for Amazon.

Backed Finance has collaborated with Kraken to issue "xStocks", which are mainly used for mapping various stock-tracking tokens. However, due to the low trading volume of xStocks on multiple cryptocurrency exchanges, they may experience significant price fluctuations when users buy and sell beyond the market's capacity. These fluctuations may intensify during nights and weekends when the stock market is closed.

The liquidity of the market itself, oracles, and potential manipulation doubts have deterred many on-chain US stock players.

In addition, the protection of user rights has also attracted market attention. After Robinhood announced the launch of OpenAI equity tokens, OpenAI quickly spoke out on X: "These 'OpenAI tokens' are not OpenAI equity. We have not collaborated with Robinhood, have not participated, and do not endorse it. Any transfer of equity requires our approval - we have not approved it. Please be cautious."

Elon Musk also mocked: "Your 'equity' is fake." EU regulators, such as the Bank of Lithuania, have intervened in the investigation, and the SEC warns of potential violations, leading to a reversal in Robinhood's stock price. Bernstein analysts point out that the company is betting on SEC policy support and the passage of the CLARITY Act to open up the tokenized asset market.

Amidst enormous controversy, Robinhood founder and CEO Vlad Tenev also recently expressed on a program that the reactions of OpenAI and SpaceX are understandable but not fair. He used a vivid introduction: it's like 'digital NIMBYism' — in principle, everyone supports tokenization, but when it actually happens to them, the appeal isn't as strong. What people really want isn't complicated financial instruments, but 'capital as a service' — press a button, and the funds can enter your account, he stated.

Whether the potential market demand can support the on-chain stock competition is worth questioning. A senior player told Foresight News, "Doing US stocks on-chain is essentially finding US stock investors among crypto players, who are used to 24x7 global trading and the significant fluctuations often seen in the crypto space. It's worth questioning how many of these players actually trade US stocks."

In addition, he also added that "for non-crypto players, learning about on-chain wallets in order to trade US stocks is also a barrier."

Another challenge comes from regulation, as finance is usually a heavily regulated field.

Recently, SEC Chairman Paul Atkins expressed that he is considering launching a cryptocurrency "innovation exemption" policy to encourage the market to advance the tokenization process.

However, this is not a shield that guarantees everything is fine.

When Apple stocks are "copied" onto the chain, who ensures that it truly represents shareholder rights? Who is responsible for information disclosure, compliant trading, and anti-money laundering? Under the framework of U.S. securities law, the issuance and transfer of any securities must be registered or exempted, while the decentralized nature of on-chain assets is precisely at odds with traditional compliance logic.

The recent statement on tokenization released by the SEC indicates that "tokenization has the potential to facilitate capital formation and enhance investors' ability to use their assets as collateral. However, despite the significant potential of blockchain technology, it does not possess the 'magic' to change the nature of the underlying asset. Tokenized securities are still securities. Therefore, market participants must carefully consider and comply with the relevant provisions of federal securities law when trading such instruments."

Once it involves cross-border custody, KYC deficiencies, or liquidity-oriented unregistered platforms, tokenized U.S. stocks are likely to be regarded by the SEC as an illegal securities issuance. This is a test for innovators and a blind spot for regulators—neither can it be left unchecked, nor can new paradigms be governed by old rules.

Therefore, how subsequent tokenization companies and protocols "dance with shackles" in the gray regulatory area has become an important issue that must be addressed.