Author: XinGPT

Recently, companies such as Robinhood, a US-listed company, and Kraken, a cryptocurrency exchange, have launched stock token businesses. Let’s follow XinGPT Research to explore what stock tokens are and why they deserve market attention.

Robinhood Leads the Way in Stock Token Innovation

Financial technology giant Robinhood recently launched its highly anticipated Stock Tokens in the EU market, aiming to provide European users with a new way to trade stocks.

This innovative service allows users to buy and sell derivatives that track stock prices in US dollars, and Robinhood will automatically convert them into euros in the background, but will charge a 0.1% exchange fee.

The stock tokenization process is shown in the following figure:

1. Hosting and mapping mechanism

The core mechanism of Robinhood stock tokens lies in their unique custody and mapping method. These tokens are price-tracking derivatives (note that they are not securities mappings), and their underlying assets are securely held in Robinhood Europe accounts by a US-licensed institution. Robinhood Europe is responsible for issuing these contracts and recording them on the blockchain. It is worth noting that due to the derivative nature of stock tokens, the corresponding securities can only be held in Robinhood accounts and users cannot redeem them directly.

2. Regulatory compliance under the EU MiFID II framework

Robinhood stock tokens are offered as derivative contracts under the framework of MiFID II (Markets in Financial Instruments Directive II). Bitstamp, the exchange previously acquired by Robinhood, holds an MFT (Multilateral Trading Facility) license, which complies with the EU's licensing requirements for companies that provide derivative trading services. This means that Robinhood's services are regulated accordingly in the EU, providing users with certain compliance guarantees. However, it should be noted that Robinhood stock tokens are currently only available in the EU and are not tradable in the United States.

3. Trading hours and corporate action processing

In terms of trading hours, in the first phase, Robinhood stock tokens will be available for trading five days a week, from Monday 02:00 CET/SDST to Saturday 02:00 CET/SDST.

For situations involving corporate actions (such as dividends, bonuses, splits, etc.), Robinhood will execute on your behalf:

• Position adjustments: In the event of a stock split, reverse split, ticker symbol change, or spin-off, the number of your stock tokens may automatically adjust in your account to reflect the change in the underlying stock.
• Cash distributions: In the event of a merger, acquisition, liquidation or delisting, you may receive cash distributions denominated in Euros depending on the event.
• Dividends: Cash dividends are processed automatically. You will receive dividends in Euros and they will appear as cash distributions in your transaction history. There are no exchange fees for dividend payments, but withholding taxes may apply depending on your location.
• In terms of capital turnover, the funds obtained from selling stock tokens can be used for trading immediately and can be withdrawn on T+1 day.

4. Stock Tokens on the Chain

The issuance of Robinhood stock tokens uses blockchain technology, initially based on the Arbitrum blockchain, and later planned to migrate to Robinhood's self-built Layer2 blockchain. This shows that Robinhood is committed to using blockchain technology to improve transaction efficiency and transparency.

The stock tokens launched by Robinhood undoubtedly provide European users with more diversified investment options. However, as a new type of derivative, users still need to fully understand its mechanism, risks and relevant regulatory provisions before participating in transactions.

5. Entering the private equity market: OpenAI and SpaceX tokenization

As part of its broader cryptocurrency promotion plan, Robinhood has made private equity accessible through blockchain technology for the first time, launching tokenized shares of OpenAI and SpaceX to European users. This milestone move, thanks to the more flexible regulatory environment in the European Union, allows ordinary investors to access these private company shares that are usually only open to insiders and high-net-worth investors.

Kraken’s design is more open to Crypto Native

1.. Hosting and mapping mechanism

Custody mechanism: xStocks is responsible for purchasing and custodial real stocks or ETF assets by Backed Finance, which are stored in compliant third-party custodians (such as Alpaca Securities in the United States, InCore Bank in Switzerland, and Maerki Baumann). Each xStocks token is 1:1 anchored to the underlying asset, and the custody process is strictly regulated to ensure asset security and transparency. The official website emphasizes that Backed Finance's Proof of Reserves mechanism is regularly verified by Chainlink to ensure that the token matches the actual asset.

Mapping mechanism: xStocks is an SPL token based on the Solana blockchain, representing partial ownership of the underlying stock or ETF. The tokenization process is implemented through smart contracts, and prices are synchronized with traditional markets in real time through Chainlink oracles. Users can transfer xStocks to Solana-compatible wallets (such as Phantom) and use them for trading, liquidity mining or collateral in decentralized finance (DeFi) protocols (such as Raydium, Jupiter, Kamino). The official website specifically points out that xStocks can be redeemed for the cash value of the underlying assets at any time, and the settlement process is fast and efficient.

Additional details: xStocks supports fractional ownership, with a minimum investment threshold as low as $1, suitable for retail investors. Tokenization eliminates the cumbersome processes of traditional brokers and reduces the cost and delay of cross-border investment.

2. Regulatory compliance license

Compliance framework: Kraken and Backed Finance actively work with global regulators to ensure that xStocks complies with local laws and regulations. The official website clearly states that Kraken implements strict KYC and AML processes, and all users must pass identity verification. The issuance and trading of xStocks are subject to Backed Finance's regulatory framework, and the specific terms can be viewed in the Base Prospectus of backed.fi.

Regional restrictions: xStocks is currently only open to non-US customers. It does not support users in the US, Canada, UK, EU, and Australia. The target markets include Europe (partial regions), Latin America, Africa, and Asia. The official website does not explicitly mention users from mainland China, but the X post indicates that users from mainland China are not restricted from registering. Further verification is needed.

Regulatory challenges and prospects: The official website acknowledges that tokenized securities face a complex international regulatory environment. Kraken is communicating with regulators and plans to gradually expand supported jurisdictions. Kraken emphasizes its compliance-first strategy to reduce legal risks.

Additional details: Kraken holds a MiCA (Markets in Crypto-Assets Regulation) license in the European Union, which supports its compliant operations in Europe and may lay the foundation for the future expansion of xStocks in parts of Europe.

3. Trading hours and corporate action processing

Trading hours: xStocks supports 24/5 trading (all day from Monday to Friday), breaking the limitation of the traditional US stock market from 9:30-16:00 (EST). The official website confirmed that xStocks can be traded on the Kraken platform or Solana chain through compatible wallets (such as Phantom). During the market closure period (weekends and US holidays), on-chain transactions can still be carried out. The price is based on the last closing price and market supply and demand provided by the Chainlink oracle, and price fluctuations similar to "prediction market" may occur. Kraken plans to achieve 7/24 all-weather trading in the future.

Corporate Action Processing: The official website clearly states that xStocks holders do not enjoy the voting rights or shareholder meeting participation rights of traditional shareholders. Dividends are distributed indirectly through the token price adjustment mechanism, which is equivalent to airdropping tokens of equal value to users in proportion to their holdings to ensure the transmission of economic benefits. Other corporate actions (such as stock splits and mergers) are handled by Backed Finance, and the number or value of tokens is adjusted accordingly to reflect changes in the underlying assets.

Additional details: The official website emphasizes that xStocks' on-chain transactions support instant settlement (T+0), which greatly improves efficiency compared to the T+2 settlement cycle of the traditional market. The participation of the DeFi ecosystem (such as being used as collateral in Kamino Lend) further enhances the flexibility of xStocks, but the depth of the liquidity pool may be limited during the market closure period, so be wary of slippage risks.

4. Supported blockchains and issuance status

Supported blockchains: xStocks is currently based on the Solana blockchain and uses the SPL token standard. According to the official website, Solana was selected as the first launch platform due to its high throughput (thousands of transactions per second), low transaction costs (about $0.01 per transaction), and mature ecosystem (support for DeFi protocols such as Raydium and Jupiter). Kraken and Backed Finance plan to expand xStocks to other high-performance blockchains (such as Ethereum or Arbitrum) in the future to improve interoperability and market coverage.

Issue: xStocks is issued by Backed Finance, with the first batch of 60 US stocks and ETFs listed, including Apple (AAPL), Tesla (TSLA), Nvidia (NVDA), Microsoft (MSFT), Google (GOOG) and SPDR S&P 500 ETF (SPY). The official website stated that Kraken will launch xStocks on the platform from June 30, 2025, and plans to continue to increase the types of supported assets. xStocks is also tradable on Bybit and Solana DeFi platforms (such as Raydium and Kamino Swap), expanding market coverage.

Issuance background and ecology: Backed Finance was founded by the original DAOStack core team and has received investment from institutions such as Coinbase, focusing on tokenized financial assets. The issuance of xStocks is supported by partners such as Chainlink (price oracle), Raydium, Jupiter and Kamino, forming the "xStocks Alliance" to provide liquidity, technology and ecological integration for tokens. The official website emphasizes that xStocks is not only a business expansion of Kraken, but also a milestone in the integration of traditional finance and blockchain.

Additional details: The official website points out that the issuance of xStocks is dynamically adjusted and linked to the purchase and redemption of the underlying assets. Users can trade xStocks with fiat currency, cryptocurrency or stablecoins (such as USDT) through the Kraken platform, with an investment threshold as low as $1, suitable for retail investors around the world.

In comparison, Robinhood has better compliance and coverage of the mainstream population, and provides unlisted stocks; while Kraken covers more regions, supports native on-chain transactions and DeFi protocols, and is more Crypto Native.

To make an inappropriate analogy, Robinhood’s route is a bit like USDC, while Kraken’s target is like USDT; one is a temple, the other is grassroots.

For startup teams, participating in the issuance of new stock token assets may not necessarily be able to compete with two large companies. At present, there are two types of opportunities:

Coverage of segmented populations or regions, similar to the logic of replacing Tiger Securities, hitting regions and populations that traditional brokerages cannot cover but crypto can reach;

Financial product innovation: when stock tokens are included in the asset pool, entrepreneurial teams can provide new derivative assets and trading strategies to differentiate themselves from large exchanges, such as high-leverage contracts, leveraged ETFs, etc.