Looking at asset tokenization from xStocks: The compliance path and challenges of Backed Finance

Product Launch: On June 30, 2025, Bybit and Kraken launched xStocks by Backed Finance, a Swiss platform offering 1:1 tokenized stocks backed by real assets held in regulated custodians like Swiss banks. These tokens, issued on Solana, enable 24/7 trading but are restricted to non-US users.
Team Background: Backed's co-founders previously worked on DAOstack, a failed project. They pivoted in 2021 to focus on compliant asset tokenization, securing $9.5M in Series A funding in 2024 led by Gnosis.
Product System: Backed offers xStocks and bTokens, tokenizing blue-chip stocks, index funds, and bonds across Ethereum, Solana, and other chains. These tokens integrate with DeFi protocols for lending and arbitrage but are structured as debt, not equity, avoiding stamp duty and enabling on-chain transfers.
Trading Challenges: Despite support from major exchanges, liquidity is concentrated in a few tokens (e.g., TSLAx, SPYx), with low activity for others. On-chain and exchange trading face inefficiencies, high spreads (1%), and fees (0.5%), limiting user experience.
Target Audience: xStocks caters to crypto-native users outside the US, offering stablecoin payments, no US stock account requirements, and EU compliance.
Future Directions: Derivatives like stock perpetual contracts could attract crypto users with high volatility and leverage. Tokenizing unlisted equity (e.g., OpenAI, SpaceX) is another potential path, though regulatory hurdles remain.
Conclusion: While xStocks demonstrates strong product design, its spot market limitations highlight the need for derivatives and equity tokenization to drive broader adoption in on-chain securities.

Author | Wu says blockchain

This article does not constitute any investment advice. Readers are advised to strictly abide by local laws and regulations and not participate in illegal financial activities.

On June 30, 2025, crypto exchanges Bybit and Kraken announced the launch of the xStocks product provided by Backed Finance, a Swiss compliant asset tokenization platform. xStocks is a series of tokens that are collateralized 1:1 by real stocks, and the underlying assets are held by regulated third-party custodians (such as Swiss banks such as InCore Bank and Maerki Baumann). These tokens are issued on the Solana public chain as SPL standards, supporting 7×24-hour trading and instant settlement on the chain, breaking through the time and geographical limitations of the traditional stock market. According to compliance requirements, xStocks is currently only open to non-US users, and Americans are not allowed to purchase or hold the product. Subsequently, a large number of leading platforms such as Cryptocom and GMGN also launched xStocks.

Team Background

According to LinkedIn, the three co-founders of Backed Finance all worked on the discontinued DAOstack project. DAOstack raised nearly $30 million in private placements, pre-sales and public offerings from Q4 2017 to May 2018, with financing prices ranging from $0.708 to $0.9423. Major investors included Cultu.re, Endor Protocol, Gnosis and Menlo One. However, the price of the project's GEN token fell sharply after May 2021 and eventually approached zero. At the end of 2022, DAOstack was officially shut down. This relatively negative team background also sparked community discussion.

In 2021, inspired by the widespread application of stablecoins, the three founders left DAOstack and founded Backed Finance, committed to introducing traditional assets such as stocks into the blockchain system in a compliant manner. From 2021 to 2022, Backed completed the project feasibility verification and seed round financing, and established cooperative relationships with custodian banks and securities firms. The prospectus of related products obtained EU regulatory approval. The first batch of products will be launched in 2023, and the cumulative issuance scale will exceed US$50 million. In April 2024, Backed completed a US$9.5 million Series A financing, led by Gnosis, and participating investors included Exor Seeds, Cyber Fund, Mindset Ventures and other institutions.

Product system and on-chain deployment

Backed Finance currently provides on-chain tokenized securities services covering global blue-chip stocks, index funds and short-term bonds through two major product lines - xStocks and bTokens. All tokens are backed by 1:1 physical assets and have ISIN numbers approved by EU compliance. Products have been issued on mainstream public chains such as Ethereum, Solana, Avalanche, Base, Polygon, and integrated with DeFi protocols such as Kamino Finance, Raydium, and Jupiter Exchange, supporting on-chain strategy deployment such as lending, market making, and arbitrage.

DigiFT analyst Ryan pointed out that xStocks token is essentially a debt structure (corp debt, tracking underlying assets), not an equity token. The issuing entity does not need custody qualifications to track underlying assets, so the backed issuing entity is an SPV, which does not have distribution qualifications. xStock involves a Bermuda DA license entity PDSL, which is actually a subsidiary of Kraken, and is distributed through this entity.

Because it is a debt, it involves dividends. xStock directly airdrops tokens; tokens do not involve corp actions. Debts can issue bearer bonds, so in essence they are more like stablecoins and are corporate liabilities. More importantly, the transfer of ownership of debt does not require registration (equity is required), so there is no stamp duty in the middle (although it is a very ridiculous tax in traditional finance), and any transfer on the chain can be achieved.

The purchase involves the exchange of funds and stablecoins, so there is a purchase limit for each transaction. In addition, traditional brokerages only support the opening hours of weekdays and BlueOcean before and after the market. In order to make up for the losses of market makers, the spread is set at 1%, and the fee is actually relatively high, 0.5%. In short, it allows users to gain exposure to US stocks, but there is no further effect, but it is enough for now. If it is to be institutionalized in the future, other issuance structures and plans are still needed.

Trading experience: Insufficient liquidity and participation threshold

Despite the support of Bybit and Kraken, the actual trading activity of xStocks is still highly concentrated, with only six targets, NVDAx, MSTRx, TSLAx, CRCLx, SPYx and AAPLx, having relatively obvious trading volume. According to the on-chain data provided by defioasis, on June 30, 2025, the first day of the product launch, the on-chain transaction volume was US$1.338 million, the number of independent trading users was 1,225, and the number of transactions was 2,510; on July 1, the on-chain trading activity increased significantly, with a transaction volume of US$6.64 million, 6,565 new independent trading users, and 17,879 transactions. Transactions are mainly concentrated in a few tokens such as TSLAx (US$1.71 million), SPYx (US$1.53 million) and CRCLx (US$940,000). The on-chain transactions of most other targets are extremely limited, some pools have zero liquidity, the number of transactions is less than 20, and slippage problems are common.

In addition to the on-chain path, xStocks can also be traded through internal exchange matching. Bybit provides USDT-based trading pairs, while Kraken supports trading methods with fiat currencies as the medium, but has not yet opened stablecoin trading pairs and has a minimum purchase amount limit. It should be noted that both on-chain transactions and exchanges currently generally face the problem of insufficient liquidity, low user transaction efficiency, limited market depth, and the overall trading experience is still significantly different from traditional CFD platforms.

Targeted groups and structural advantages

The Backed model mainly serves non-US users who have difficulty accessing US stocks through traditional brokerages, especially crypto-native users. Its advantages include: support for stablecoin payments and small transactions, no need for US stock accounts, 7×24 hour matching and settlement on the chain, real asset custody, and EU regulatory compliance.

Expansion path: Derivatives and unlisted equity tokenization

Although xStocks provides infrastructure for on-chain U.S. stock investment, the liquidity bottleneck of the spot market still exists, making it difficult to form a large-scale trading ecosystem. Therefore, the industry has begun to pay attention to derivatives paths with more trading attributes, especially stock perpetual contracts (stonk perps). Popular technology stocks have high volatility, and combined with high leverage mechanisms, they can bring high-volatility returns similar to altcoins, which is more attractive to crypto users. Such products do not require actual stock delivery, and can rely on oracle prices and funding rate mechanisms to achieve pure on-chain transactions. The technical path is mature and suitable for priority deployment on decentralized platforms such as Hypeliquid. Compared with the compliance barriers faced by centralized exchanges, decentralized derivatives platforms have higher flexibility and experimental space.

Another development direction worth noting is the tokenization of unlisted company equity. Compared with the traditional private equity market with opaque information and limited exit mechanisms, the issuance of transferable equity tokens on the chain, combined with mechanisms such as DAO governance, contract lock-up and qualified investor thresholds, is expected to achieve an efficient and transparent early equity circulation structure, especially for star companies with high market attention such as OpenAI and SpaceX. However, this path still faces challenges such as regulatory uncertainty and complex issuance structure, and is more likely to exist in the form of pilot or gray compliance in the short term.

Conclusion

xStocks provides a realistic path for the tokenization of compliant assets. Its on-chain structure, cross-chain deployment, and DeFi integration capabilities demonstrate strong product design capabilities. However, the limited liquidity of the spot model and insufficient user expansion capabilities determine that it is difficult to support the growth curve of the tokenized stock market alone. In the future, breakthroughs in the combination of perpetual derivatives and early equity tokenization may become a key node in promoting the on-chain securities market from "tool-type products" to "trading assets."