Forward the Original Title‘Behind Tokenized U.S. Stocks: A Hot Narrative but a Cold Market—Can Old Wine in a New Bottle Fuel the Second Curve of the Bull Run?’

With the market in a prolonged downturn, can stock tokenization—an old concept in a new form—serve as the next big narrative to build a market bottom?

Recently, tokenizing U.S. stocks has become a hot topic despite the overall market malaise.

On March 8, Swiss tokenization issuer Backed launched wbCOIN, a tokenized version of Coinbase stock, on the Base blockchain. Users can trade it against USDC on CoWSwap, with Backed claiming a 1:1 peg to $COIN stock value and legal enforceability. While Backed clarified it has no official ties with Coinbase, the move sparked community discussions: Is stock tokenization poised for a new growth cycle? And in these sluggish market conditions, can stock tokenization serve as a fresh narrative to restore confidence?

Hot Narrative, Cold Market: The Stark Contrast in Tokenized US Stocks

With the pro-crypto Trump administration back in office, the legal battle between the SEC and Coinbase is expected to subside. In early 2025, Base protocol lead Jesse Pollak mentioned on X that Coinbase is exploring the possibility of tokenizing $COIN stock on Base for U.S. users. However, launching this service in a fully compliant manner will take time.

Meanwhile, Backed has moved ahead swiftly. Founded in 2021, Backed received early funding from Gnosis and Semantic and primarily targets global markets, according to its official materials. Its tokenized assets comply with the MiFID II framework under EU regulations and have an approved prospectus under EU law.

However, wbCOIN is not Backed’s first tokenized stock. In July 2024, it partnered with INX to launch a tokenized NVIDIA stock (BNVDA) version. The firm has also issued tokenized assets for the S&P 500, Tesla, and other stocks. However, at the time of their launch, the market focus was not on security tokenization. Today, the market is in dire need of a compelling narrative to rebuild confidence.

That said, the lukewarm reception isn’t just due to Backed’s limited access to the U.S. market or the broader market downturn. While the topic has generated buzz, trading activity has been underwhelming. As of March 11, wbCOIN’s TVL stood at $4.42 million, yet its daily trading volume on Aerodrome was only $3,352—lower than some newly launched meme coins.

This sluggish performance is not just due to wbCOIN’s recent launch—another earlier tokenized stock, BNVDA, has seen a mere $113 in trading volume, facing the same lack of interest.

Despite the excitement around the concept, the market for tokenized U.S. stocks remains in its infancy, with limited scale and liquidity. Perhaps a Coinbase-backed tokenized stock could drive greater adoption.

Tokenized Stocks: An Old Concept Where Compliance is the Key Barrier

The once-dominant FTX exchange also offered tokenized stock trading between 2020 and 2022, including shares of Tesla, GameStop, and others. However, FTX’s dramatic collapse in 2022 abruptly ended this service. In the aftermath, rumours surfaced questioning whether FTX had fully backed its tokenized stocks with the corresponding equities, which further eroded trust in exchange-issued tokenized stocks.

In 2021, Binance also attempted to introduce tokenized stock products for Tesla, Coinbase, Apple, and others, allowing users to purchase fractional shares. However, global regulators swiftly cracked down. Within weeks of launch, financial regulators in the UK and Germany issued warnings that these products might violate securities laws. Less than three months later, Binance announced the delisting of all tokenized stocks.

Additionally, Bittrex Global, an exchange once known for offering tokenized stock trading, ultimately shut down its platform and filed for bankruptcy due to mounting regulatory pressure and an SEC lawsuit.

These cases highlight that regulatory hurdles were the primary reason behind the failure of exchange-issued tokenized stocks in the previous cycle. Now, as the market revisits the concept, several factors have changed:

1. With the Trump administration showing greater support for crypto, the tension between the crypto industry and regulators has eased.
2. In a weakened market, there is a growing need for narratives backed by real value.
3. Compliance and technology have matured. Compared to the previous era of unchecked growth, today’s crypto landscape prioritizes regulatory frameworks and technical safeguards. For instance, Backed ensures that each tokenized stock is issued under an EU-approved prospectus, which clearly defines holders’ rights to the underlying equities. On the technical side, advancements in oracles and blockchain infrastructure have significantly improved reliability.

A Tiny Fraction vs. Trillion-Dollar Expectations: The Reality of Tokenized Stocks

Despite impressive growth rates, the actual market size of tokenized stocks remains far from institutional projections. Fundamentally, whether it’s tokenized U.S. equities or other securities, they all fall under the category of real-world assets (RWA). However, tokenized stocks occupy a unique position—both crypto and U.S. equities are highly volatile and liquid financial assets, yet the vast trading volume, deep capital pools, and strong fundamentals of U.S. equities make them highly desirable within the crypto space.

Industry expectations for stock tokenization are overwhelmingly optimistic. Some major institutions predict that the tokenized asset market could reach tens of trillions of dollars by 2030. For instance, Boston Consulting Group (BCG) estimates that the global tokenized asset market could hit $16 trillion by then. Security Token Market’s report is even more ambitious: it forecasts up to $30 trillion in tokenized assets, which is driven primarily by stocks, real estate, bonds, and gold.

However, as of March 11, the total value of RWA assets on-chain stands at approximately $17.8 billion, with tokenized stocks accounting for just $15.43 million—less than 0.1% of the total. Monthly trading volume is a mere $18 million. Clearly, stock tokenization remains an underdeveloped segment within the broader RWA space.

That said, tokenized stocks have shown resilience and strong growth momentum. In July 2024, the total on-chain value of tokenized stocks was around $50 million. This means that the market has tripled in just six months—a growth rate far outpacing that of most altcoins.

Moreover, the recent market downturn has highlighted the relative stability of tokenized stocks. Bitcoin has fallen below $80K, and the total crypto market cap has retraced to early 2024 levels, with a 30% decline over the past three months. In contrast, tokenized stocks have held steady near all-time highs. This suggests that the broader U.S. equities market is less susceptible to the extreme volatility of individual assets, which makes tokenized stocks a potential hedge within crypto portfolios.

For investors today, tokenized U.S. stocks are neither a bear market saviour nor a fleeting trend. Instead, they resemble a seed waiting to sprout—one that depends on a delicate balance of regulation, technology, and market sentiment. Whether it grows into a towering tree may hinge on the SEC’s next policy move, Coinbase’s regulatory strategy, or the capital flows of the next bull cycle. The only certainty? This experiment is far from over.

Disclaimer:

1. This article is reprinted from [PANews]. Forward the original title ‘Behind Tokenized U.S. Stocks: A Hot Narrative but a Cold Market—Can Old Wine in a New Bottle Fuel the Second Curve of the Bull Run?’. The copyright belongs to the original author [Frank]. If you have any objection to the reprint, please contact Gate Learn team, the team will handle it as soon as possible according to relevant procedures.
2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.
3. The Gate Learn team translates other language versions of the article and are not mentioned in Gate.io, the translated article may not be reproduced, distributed or plagiarized.