Recently, US-listed companies like Robinhood and crypto world exchange Kraken have launched stock token services. Let’s explore together with XinGPT Research what stock tokens are and why they are worth the market’s attention.

Robinhood leads the innovation trend of stock tokens

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

This innovative service allows users to buy and sell derivatives tracking stock prices priced in USD, with Robinhood automatically handling the EUR conversion in the background, but a 0.1% exchange fee will be charged.

The process of stock tokenization is shown in the figure below:

1. Custody and Mapping Mechanism

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

2. Regulatory Compliance under the EU MiFID II Framework

Robinhood stock tokens are offered as derivative contracts under the MiFID II (Markets in Financial Instruments Directive II) framework. The Bitstamp exchange, which was previously acquired by Robinhood, holds an MTF (Multilateral Trading Facility) license, which complies with the EU’s licensing requirements for companies providing derivative trading services. This means that Robinhood’s services are subject to corresponding regulation in the EU, providing users with a certain level of compliance assurance. However, it should be noted that Robinhood stock tokens are currently only available in the EU and cannot be traded in the United States.

3. Trading Time and Company Actions Handling

In terms of trading hours, the first phase of Robinhood stock Token is available for trading five days a week, from Monday 02:00 to Saturday 02:00 Central European Time/Summer Time.

For situations involving company actions (such as dividends, distributions, splits, etc.), Robinhood will act on behalf of the clients:

• Position adjustments: For actions such as stock splits, reverse splits, changes in stock codes, or spin-offs, the number of your stock tokens may be automatically adjusted in your account to reflect the changes in the underlying stocks.
• Cash distributions: In the event of mergers, acquisitions, liquidations, or delistings, you may receive cash distributions denominated in euros based on the event.
• Dividends: Cash dividends will be processed automatically. You will receive dividends paid in euros, and they will be shown in your transaction history as cash distributions. There are no exchange fees for dividend payments, but withholding tax may be charged 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 Token on Chain

The issuance of Robinhood’s stock Token utilizes blockchain technology, initially based on the Arbitrum blockchain, with plans to migrate to Robinhood’s self-built Layer 2 blockchain in the future. This indicates that Robinhood is committed to leveraging blockchain technology to enhance trading efficiency and transparency.

Robinhood’s launch of stock tokens undoubtedly provides European users with a more diverse range of investment options. However, as a new type of derivative, users still need to fully understand its mechanisms, risks, and relevant regulatory requirements before participating in trading.

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

As part of its broader cryptocurrency promotion plan, Robinhood has for the first time enabled access to private equity through blockchain technology, launching tokenized stocks of OpenAI and SpaceX to European users. This milestone move is made possible by the more flexible regulatory environment in the European Union, allowing ordinary investors to access equity in these typically private companies that are usually only available to insiders and high-net-worth investors.

Kraken’s design is more open Crypto Native

1. Custody and Mapping Mechanism

• Custody Mechanism: xStocks are purchased and custodied by Backed Finance, storing real stocks or ETF assets in compliant third-party custodians (such as Alpaca Securities in the USA, InCore Bank in Switzerland, and Maerki Baumann). Each xStocks Token is 1:1 pegged to the underlying assets, with the custody process being 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 the matching of tokens with actual assets.
• Mapping mechanism: xStocks is an SPL Token based on the Solana blockchain, representing partial ownership of underlying stocks or ETFs. The tokenization process is achieved through smart contracts, with prices synchronized in real-time with traditional markets via Chainlink oracles. Users can transfer xStocks to Solana-compatible wallets (like Phantom) for use in decentralized finance (DeFi) protocols (such as Raydium, Jupiter, Kamino) for trading, liquidity mining, or collateral. The official website specifically notes that xStocks can be redeemed at any time for the cash value of the underlying assets, with a fast and efficient settlement process.
• Additional details: xStocks supports fractional ownership, with a minimum investment threshold as low as $1, making it suitable for retail investors. Tokenization eliminates the cumbersome processes of traditional brokers, reducing the costs and delays of cross-border investments.

2. Regulatory Compliance License

• Compliance Framework: Kraken and Backed Finance actively collaborate with global regulatory authorities to ensure that xStocks comply with local laws and regulations. The official website clearly states that Kraken implements strict KYC and AML processes, and all users must go through identity verification. The issuance and trading of xStocks are governed by the regulatory framework of Backed Finance, with specific terms available in the Base Prospectus at backed.fi.
• Regional restrictions: xStocks is currently open only to non-U.S. customers and does not support users from markets such as the U.S., Canada, the U.K., the EU, and Australia. The target markets include parts of Europe, Latin America, Africa, and Asia. The official website does not explicitly mention users from mainland China, but X posts indicate that users from mainland China are not restricted from registering, which needs further verification.
• Regulatory Challenges and Outlook: The official website acknowledges that tokenized securities face a complex international regulatory environment. Kraken is in communication with regulators and plans to gradually expand the supported jurisdictions, emphasizing its compliance-first strategy to mitigate legal risks.
• Additional details: Kraken holds a MiCA (Markets in Crypto-Assets) license in the EU, which supports its compliant operations in Europe and may lay the foundation for future expansion of xStocks in certain regions of Europe.

3. Trading Time and Company Actions Handling

• Trading hours: xStocks supports 24/5 trading (all day Monday to Friday), breaking the traditional US stock market limitations of 9:30-16:00 (Eastern Time). According to the official website, xStocks can be traded on the Kraken platform or on the Solana chain through compatible wallets (such as Phantom). During off-hours (weekends and US holidays), on-chain trading can still occur, with prices based on the last closing price provided by the Chainlink oracle and market supply and demand, which may exhibit price fluctuations similar to a “prediction market.” Kraken plans to achieve 7/24 trading in the future.
• Corporate actions handling: The official website states that xStocks holders do not enjoy the voting rights of traditional shareholders or the right to participate in shareholder meetings. Dividends are indirectly distributed through a token price adjustment mechanism, equivalent to airdropping tokens of equal value to users based on their holdings ratio, ensuring 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 trading supports instant settlement (T+0), significantly improving efficiency compared to the traditional market’s T+2 clearing cycle. Participation in the DeFi ecosystem (such as being used as collateral in Kamino Lend) further enhances the flexibility of xStocks, but liquidity pool depth may be limited during market closures, and caution should be taken regarding slippage risk.

4. Supported blockchains and issuance status

• Supported Blockchains: xStocks is currently based on the Solana blockchain, using the SPL Token standard. According to the official website, Solana was chosen as the launch platform due to its high throughput (thousands of transactions per second), low transaction costs (about $0.01 per transaction), and mature ecosystem (supporting DeFi protocols like Raydium, Jupiter, etc.). Kraken and Backed Finance plan to expand xStocks to other high-performance blockchains (such as Ethereum or Arbitrum) in the future to enhance interoperability and market coverage.
• Issuance status: xStocks is issued by Backed Finance, with the first batch listing 60 US stocks and ETFs, including Apple (AAPL), Tesla (TSLA), Nvidia (NVDA), Microsoft (MSFT), Google (GOOG), and SPDR S&P 500 ETF (SPY), among others. According to the official website, Kraken will launch xStocks on its platform starting June 30, 2025, and plans to continuously increase the variety of supported assets. xStocks can also be traded 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 core team of DAOStack and is backed by institutional investments from Coinbase and others, 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 ecosystem integration for the tokens. The official website emphasizes that xStocks is not only an extension of Kraken’s business but also a milestone in the fusion of traditional finance and blockchain.
• Additional details: The official website states that the issuance of xStocks is dynamically adjusted and is linked to the purchase and redemption of underlying assets. Users can trade xStocks on the Kraken platform using fiat currency, cryptocurrencies, or stablecoins (such as USDT), with an investment threshold as low as 1 dollar, making it suitable for retail investors worldwide.

In comparison, Robinhood has better compliance and coverage of the mainstream population, and offers non-listed stocks; while Kraken covers more regions and supports native blockchain trading and DeFi protocols in the crypto world, making it more Crypto Native.

To make an inappropriate analogy, Robinhood’s path is somewhat like USDC, while Kraken is more aimed at USDT; one is in the halls of power, the other is grassroots.

For startup teams, participating in the issuance of new stock Token assets may not necessarily compete with the two large companies, and currently, there are two types of opportunities:

• Segmented coverage of people or regions, similar to the logic of replacing traditional brokerage firms like Tiger Brokers, covering areas and demographics that traditional brokers cannot reach, but which crypto can.
• Financial product innovation, with stock tokens included in the asset pool, enables entrepreneurial teams to offer new derivative assets and trading strategies to differentiate from major exchanges, such as high-leverage contracts, leveraged ETFs, etc.

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