How to make the US stock market great again?

Author: 1912212.eth, Foresight News

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

As the largest securities market in the world, the US stock market has rarely disappointed American investors. However, there are still too many countries and regions where investors cannot access such assets, missing out on wealth.

What would happen if purchasing such assets no longer required an account, and was not limited by region or trading hours? With just a mobile phone and a balance in a cryptocurrency wallet, one could buy "stocks" of American stock giants anytime and anywhere. This is no longer just a fictional scenario, but a real transformation brought about by the "tokenization of US stocks."

In the next era, the stock market will no longer wait for the bell to ring, and investments will no longer require brokers to place orders.

Tokenization, simply put, is the process of converting real-world assets into programmable and tradable digital tokens. These tokens are based on blockchain technology and typically comply with the ERC-20 or similar standards, ensuring transparency and security. Tokenized U.S. Stocks refers to mapping or anchoring the stocks of publicly listed American 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 blockchain world, "replicating" a traditional stock turns it into a "chain asset." For example, a stock worth tens of thousands of dollars can be fragmented into thousands of smaller 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 technological risks.

For investors, the investment threshold is lowered after the tokenization of US stocks. For enterprises, the motivation to explore tokenization comes from multiple factors. The liquidity bottlenecks in traditional financial markets are increasingly prominent, especially during non-trading hours. Additionally, institutional investors such as BlackRock and JPMorgan are viewing tokenization as a tool for reducing 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 the US stock market 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 by 2025, with the US stock market accounting for over 40%.

High returns are another key factor, with the S&P index recently reaching a historic high of $6,336. The average annual return of the S&P 500 index since 1957 is about 10.4% (approximately 6.5% after adjusting for inflation), while the average annual return over the past 20 years has been 10.364%, and 9% over the past 30 years. 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 is particularly cumbersome and costly for overseas investors.

The Tide Is Rising

Retail investors are flooding into tokenized US stocks to bypass thresholds and the wealth effect, but what about institutional actions? Crypto exchanges, on-chain protocols, and online brokerages are all gearing up.

On May 22, the cryptocurrency exchange Kraken, in collaboration with Backed Finance, launched a tokenized stock and ETF trading service called "xStocks," initially covering over 50 U.S. listed stocks and ETFs, including Apple, Tesla, and NVIDIA.

Another cryptocurrency exchange, Bybit, has chosen to partner with Swarm to enter the US stock market. It is worth noting that Kraken and Bybit do not issue stock tokens themselves but instead opt to collaborate with third parties. The ones that actually issue stock tokens include Backed Finance and Securitize. The former cooperates 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 discussed and focused tokenization in the crypto space is the blockchain institutional platform Ondo Finance and the well-known American brokerage Robinhood.

Ondo Finance is an institutional platform focused on tokenizing traditional financial assets and introducing them to the blockchain. It is also the most well-known and representative project among RWA projects that have issued tokens, with the most comprehensive product line. Ondo's flagship product, USDY, is a tokenized US Treasury bond, with a total TVL reaching 1.39 billion dollars. However, the market seems to be lukewarm, and its token price has been declining from 2 dollars to around 0.7 dollars, fluctuating for an extended period.

The wave of tokenization in the US stock market has surged, and Ondo is not sitting idle. Since the beginning of July, it first partnered with Pantera Capital to plan an investment of $250 million to promote RWA tokenization. Then, on July 4, it acquired the broker Oasis Pro, which is 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 to tokenization in the US stock market.

On July 10, Ondo acquired Strangelove again 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 Ondo launches tokenized US stocks, it will leverage its strong resource integration capabilities to push them to every corner of the crypto market, allowing crypto players to easily purchase tokenized US stocks.

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

This player, which disrupts the traditional brokerage industry with a zero-commission trading model, has attracted a large number of young investors, especially millennials, with its low barriers to entry and ease of use, with an average user age of 35. There are 25.8 million funded accounts, with funds under custody of $221 billion.

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 candidly stated the fundamental issue in the private equity market: the best companies have too many options and do not actively consider retail investors, leading to the "adverse selection problem." The key innovation of tokenization lies in the fact that "it can function without being chosen to join by tokenized companies," which is precisely the breakthrough that Robinhood can drive.

On July 21, the design software giant Figma revised its IPO filing S-1. In the new document, in addition to confirming the IPO price range, a significant difference from the S-1 submitted at the beginning of the month is that it explicitly states 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 form of blockchain tokens in the future. In a sense, institutions have reached potential investors from around the world through a borderless blockchain platform, gaining more potential buy interest.

In the first half of 2025, tokenization of U.S. stocks on the blockchain has shifted from concept to reality. According to data from rwa.xyz, its total TVL has risen to $530 million, with the number of monthly active addresses surging to 70,000.

Tokenization is penetrating 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 U.S. stock market, which is flourishing like the sun at noon, is actually not a new phenomenon; its past is the price paid for innovation.

The early attempts at tokenizing U.S. stocks can be traced back to the experimental explorations of decentralized protocols during the last cycle. Synthetix is one of the earliest platforms to support synthetic asset trading of U.S. stocks, allowing users to hold tokens such as sTSLA and sAAPL on-chain to simulate the price performance of U.S. 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 transitioned due to regulatory pressure and unsustainable business models.

Although there is no shareholder equity, it has opened the door to mapping crypto assets to real assets. This model provides prices through an oracle, bypassing traditional custody 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 24/7, with the tokens backed by real stocks. 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 a derivative within CEX, lacking on-chain transparency and compliance backing, which quickly triggered warnings from regulatory agencies 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 were abruptly halted; Binance, on the other hand, delisted its products after just three months due to regulatory pressure.

The ideal is rich, but reality is skinny. The FTX crash in 2022 became a watershed moment for the tokenization of US stocks, as the market shifted from "barbaric growth" to "compliance restructuring."

These cases expose the core contradiction of early tokenization in the US stock market: the imbalance among technological feasibility, compliance costs, and market demand. However, these practices laid the foundation 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 rising concept of RWA. Representatives of this round include projects like Backed Finance, which generally adopt relatively friendly jurisdictions such as Switzerland and Liechtenstein, using a "1:1 custody + verifiable reserves + on-chain issuance" method to map the actual US stock securities into tokens of standards like ERC-20, providing 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, allowing users to convert on-chain tokens to actual shares on the NYSE at a 1:1 ratio. 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 rights.

Challenges and Risks

The field full of opportunities is always accompanied by risks. The liquidity of on-chain US stocks is a real challenge.

On July 3, the price of the token AAPLX, which tracks Apple, briefly surged to $236.72, a premium of 12% over the stock trading price at that time. A similar token tracking Amazon soared to $891.58 on July 5, which is four times the stock's previous closing price. An even 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 purchase about $500 worth of Amazon token AMZNX, briefly pushing its price up to $23781.22, more than 100 times the previous day's closing price for Amazon.

Backed Finance's "xStocks", issued in collaboration with exchanges like Kraken, primarily serve users mapping various stock tracking tokens. However, due to the low trading volume of xStocks on multiple cryptocurrency exchanges, they can experience significant price fluctuations when users buy or sell beyond the market's capacity. This volatility may intensify during nights and weekends when the stock market is closed.

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

Moreover, the protection of user rights has also attracted market attention. After Robinhood announced the launch of OpenAI equity tokens, OpenAI quickly responded on X: "These 'OpenAI tokens' are not OpenAI equity. We have not collaborated with Robinhood, nor have we participated or endorsed it. Any transfer of equity must be approved by us - we have not approved it. Please be cautious."

Elon Musk also mocked: "Your 'equity' is fake." EU regulators such as the central bank of Lithuania have intervened in the investigation, and the SEC warned of potential violations, leading to a reversal and drop in Robinhood's stock price. Bernstein analysts pointed 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 significant controversy, Robinhood founder and CEO Vlad Tenev recently expressed on a program that the reactions from OpenAI and SpaceX are understandable but unfair. He used a vivid analogy: 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 is not complex 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 track 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 volatility of the crypto market. It's worth questioning how many players actually engage in US stocks."

In addition, he also added that "for non-crypto players, learning about on-chain wallets, etc., 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 stated that he is considering introducing a "innovation exemption" policy for cryptocurrencies to encourage the market to advance the tokenization process.

However, this is not a foolproof shield.

When Apple stocks are "copied" onto the chain, who ensures that they truly represent shareholder rights? Who is responsible for information disclosure, compliance 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 stated that "tokenization has the potential to facilitate capital formation and enhance investors' ability to use their assets as collateral. However, despite the great potential of blockchain technology, it does not possess the 'magic' to change the nature of the underlying assets. Tokenized securities are still securities. Therefore, market participants must carefully consider and comply with the relevant provisions of federal securities laws when trading such instruments."

Once it involves cross-border custody, missing KYC, or liquidity-oriented unregistered platforms, tokenized US stocks are very likely to be considered illegal securities issuance by the SEC. This is a test for innovators and a blind spot for regulators—neither can it be ignored nor can traditional rules effectively govern the new paradigm.

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