Tokenized Equities Surge to $10B, Leaving Regulators in Legal Limbo

Kraken's xStocks platform, a joint venture between the crypto exchange and RWA tokenization firm Backed, has surged past $10 billion in total transaction volume just over four months after its launch, marking a pivotal milestone for tokenized equities. The platform, which offers 1:1-backed digital representations of publicly traded stocks and ETFs—such as Nvidia, Tesla, and Meta—has attracted over 45,000 onchain holders, with nearly $2 billion in onchain transaction activity and $135 million in assets under management, according to Cointelegraph. Operating across Ethereum, Solana, BNB Chain, and Tron, xStocks aims to bridge traditional finance and blockchain by enabling 24/7 trading and fractional ownership, as Coinotag reported.

The rapid adoption of tokenized stocks has sparked debate over their regulatory status. John Murillo, CBO of fintech firm B2Broker, emphasized that while xStock tokens mirror the value of underlying assets, they do not confer direct ownership. "Investors hold intermediary-issued tokens, which may entitle them to payouts if the underlying shares increase in value or are sold," he noted, as Cointelegraph reported. This distinction places the sector in a legal gray area, as tokenized equities are often treated as derivative instruments rather than direct securities. Despite this uncertainty, industry data from RWA.xyz show $666 million in onchain value for tokenized public stocks, excluding trading volumes, as Coinotag reported.

Kraken's cautious approach contrasts with competitors like Robinhood, which recently faced backlash for tokenizing shares in private companies, including OpenAI. Kraken co-CEO Arjun Sethi criticized such initiatives as "terrible ideas," warning of liquidity risks and regulatory pushback, as TradingView reported. "Unlike publicly traded stocks, private securities come with transfer restrictions and limited buyer pools," Sethi argued during a Financial Times interview. Kraken has focused on established public equities to mitigate these challenges, currently offering 60 tokenized assets with plans to expand to 1,000, as TradingView reported.

The xStocks model has drawn comparisons to platforms like Securitize, which tokenizes shares and funds, and Robinhood's stock token initiatives in select markets. However, Kraken's partnership with Swiss custodian Backed Finance and its multi-chain architecture have positioned it as a leader in the space. The platform's growth reflects broader trends in RWA tokenization, with blockchain analytics firms reporting a 300% surge in related activity over the past year, as Coinotag reported.

While regulatory clarity remains elusive, the European Union's MiCA framework offers some structure for crypto assets, though equities remain a gray zone. Sethi's stance underscores the sector's tension between innovation and compliance, as platforms navigate the balance between accessibility and investor protection, as TradingView reported.