Kraken, a major cryptocurrency exchange, has announced plans to introduce tokenized versions of popular U.S. stocks and ETFs, including Apple, Tesla, and Nvidia. This initiative, aimed primarily at non-U.S. clients, is set to launch in the coming weeks.
The platform intends to offer over 50 tokenized stocks and exchange-traded funds (ETFs), such as the SPDR S&P 500 ETF and the SPDR Gold ETF. These tokens, dubbed "xStocks," will operate on the Solana blockchain—a decentralized ledger system that records cryptographic transactions.
Each xStocks token will be fully backed by the actual underlying security. Kraken's partner, Backed Finance, will purchase the corresponding shares as needed. These tokens can be redeemed for their cash value based on the underlying asset, and their price is designed to mirror the market price of the corresponding stock or ETF.
Similar to cryptocurrencies like Bitcoin, these tokenized assets will be tradable 24/7, even outside regular U.S. stock market hours.
Advantages of Tokenized Stocks
Kraken, headquartered in the U.S. with a global user base spanning over 190 countries, believes that tokenized securities will make U.S. markets more accessible to international investors. The xStocks tokens will be available in Europe, Latin America, Africa, and Asia, but not to U.S.-based users.
Beyond round-the-clock trading, Kraken highlights that tokenization offers a cheaper and simpler avenue for global investors to access U.S. equities. Arjun Sethi, Kraken's co-CEO, noted that while international investors can already buy U.S. stocks through local brokers, the process often involves high fees, slow settlement times, and operational inefficiencies.
In the future, xStocks may be traded on other cryptocurrency exchanges outside Kraken and stored in personal crypto wallets alongside assets like Bitcoin. Risk-tolerant investors could even use these tokenized stocks as collateral in crypto trading strategies.
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Previous Attempts and Regulatory Challenges
Tokenized stock offerings are not entirely new. Binance, the world's largest crypto exchange, launched similar products in 2021, including tokenized Tesla shares. However, the offering was withdrawn within months after regulators in multiple jurisdictions raised concerns over licensing compliance.
Kraken, too, must navigate complex regulatory landscapes to ensure the lawful issuance of xStocks. A company spokesperson stated that Kraken is "actively collaborating with multiple regulatory authorities."
Proponents of blockchain technology have long argued that tokenization can offer advantages in settlement speed, cost, and flexibility compared to traditional securities trading. The topic has gained renewed attention in recent months amid regulatory discussions in the U.S. The Securities and Exchange Commission (SEC) recently held a roundtable on tokenization, and major financial firms like BlackRock and Robinhood are also exploring similar products.
Frequently Asked Questions
What are tokenized stocks?
Tokenized stocks are digital representations of traditional equities or ETFs that are issued on a blockchain. They are backed by real shares and designed to track the market price of the underlying asset.
Who can trade xStokens on Kraken?
Non-U.S. clients located in Europe, Latin America, Africa, and Asia will be eligible to trade these tokens. U.S.-based users are excluded from this offering.
How are tokenized stocks different from regular stocks?
Unlike traditional stocks, tokenized versions can be traded 24/7 and may offer lower fees and faster settlement times. They also exist on a blockchain, enabling storage in crypto wallets and use as collateral in decentralized finance (DeFi).
What ensures the value of xStocks tokens?
Each token is backed by actual shares held by Backed Finance, Kraken's partner. The tokens can be redeemed for cash based on the value of the underlying security.
Are tokenized stocks regulated?
The regulatory status varies by jurisdiction. Kraken is working with regulators to ensure compliance, but investors should be aware of potential legal uncertainties depending on their location.
Can I transfer xStocks to other exchanges or wallets?
Kraken plans to allow transfers to external crypto wallets and eventually support trading on other compatible exchanges, enhancing liquidity and flexibility.
Tokenized stocks represent a significant innovation at the intersection of traditional finance and digital assets. While challenges remain—particularly in regulation—this development could broaden global access to U.S. markets and inspire further adoption of blockchain in mainstream investing.